UBS Starts CarTrade Tech With Buy Rating, Sees Strong Earnings Growth and ₹4,000 Target

UBS has initiated coverage of CarTrade Tech Ltd (NSE: CART) with a Buy rating and a price target of ₹4,000, citing the company's asset-light business model, expanding monetization opportunities, and long-term growth potential in India's online used-car marketplace.

The brokerage expects CarTrade to deliver stronger earnings growth than the broader market anticipates. UBS forecasts the company's EBITDA margin to improve from 33% in FY26 to 47% by FY30, supported by operating leverage as revenue increases. It also projects a 33% compound annual growth rate (CAGR) in earnings between FY26 and FY29, significantly above the consensus estimate of 23%. Based on these projections, UBS believes current market expectations underestimate CarTrade's earnings by roughly 15% to 20% over the next several years.

Unlike inventory-heavy competitors, CarTrade operates a digital marketplace that connects vehicle buyers, sellers, dealers, and manufacturers without owning vehicle inventory. UBS said this asset-light model enables higher profit margins, stronger returns on capital, and lower investment requirements as the business scales.

A major driver of future growth is OLX India, which CarTrade acquired in 2023. The platform attracts more than 180 million annual users, with the vast majority coming through organic traffic. UBS believes OLX India remains significantly under-monetized, with opportunities to boost revenue through paid subscriptions, premium listings, financing referrals, and other value-added transaction services.

The brokerage also highlighted favorable industry trends, forecasting India's used-car market to expand from approximately 6 million transactions in FY26 to between 9 million and 10 million by FY31. As consumers increasingly adopt organized online marketplaces and vehicle replacement cycles shorten, CarTrade is well positioned to capture a larger share of this growing market.

UBS also dismissed concerns that artificial intelligence will disrupt online classifieds. Instead, the firm said AI is enhancing marketplace platforms by improving search capabilities, buyer-seller matching, and user engagement. According to UBS, fears surrounding AI have pressured valuation multiples despite little evidence that the technology is negatively affecting marketplace fundamentals, creating an attractive opportunity for long-term investors.