Tracxn Technologies: Company Stock Analysis

Ventura 19 Jan 2024

Tracxn Technologies Ltd (Tracxn), a prominent player in the market intelligence domain for private companies, operates on a software-as-a-service (SaaS) model. It is renowned for its extensive global database and tailor-made features, helping clients to identify and monitor businesses across various sectors and regions. As of Sep 30, 2023, Tracxn has a significant user base of 3420 spread across 1258 client accounts in 50+ countries. It serves as a research partner to over 1200 entities, including investors, corporates, and government bodies, which strengthens its market position. Operating in India, Tracxn benefits from considerably lower operational costs compared to its international peers, with expenses like employee salaries being 10X and 6X lower than in countries like the US and UK respectively.

In the context of rising private investment globally and governmental efforts to improve business environments, Tracxn’s role in the market intelligence and data sector is becoming increasingly crucial. This trend is boosting the demand for its products and ensures a stable revenue outlook. Additionally, Tracxn is expanding its customer base across different regions, with no single country accounting for more than 30% of its total revenue, indicating a strategic diversification.

Over FY23-26E, we are expecting Tracxn’s revenue/ EBITDA/ PBT to grow at a CAGR of 15%/ 104%/ 38% to INR 118 cr/ INR 22 cr/ INR 26 cr respectively, while EBITDA and PBT margins are expected to improve by 1500bps to 18.6% and 940bps to 22.2% respectively. Strong revenue visibility along with the benefits of operating leverage is expected to deliver margins expansion and improve key metrics. As a result, return ratios – adj RoE is expected to improve by 1000bps to 19.8% by FY26E.

We initiate coverage on Tracxn with a BUY at the CMP of INR 112 per share with a DCF based price target of INR 182 per share representing an upside potential of 62% in the next 24 months.