Global Digitisation And AI Investments Will Expand Aftermarket Opportunities

Key Takeaways

• Investments in AI, data-driven platforms, and global expansion position the company for increased market share, recurring revenue, and future top-line growth.
  
• Emphasis on multi-year subscriptions, integration efficiencies, and disciplined cost control is enhancing margins, earnings stability, and cash flow for future innovation.
  
• Dependency on contract renewals, cost pressures, and competitive threats could limit earnings growth and constrain Infomedia's long-term revenue expansion outside core markets.

Catalysts

A technology company, develops and supplies electronic parts catalogues, service quoting software, and e-commerce solutions for the automotive industry internationally.

• The continued global digitisation of the automotive aftermarket, supported by Infomedia's investments in rebuilding core platforms (like Infodrive CX) and increasing AI product capabilities through the Intellegam partnership, positions the company to capture increased demand for cloud-based, data-driven solutions-likely driving future revenue growth and supporting recurring revenue streams.
  
• Expansion into emerging markets, including recent progress with Chinese OEMs and regionally-focused sales leadership in EMEA and the Americas, is set to grow Infomedia's addressable market, providing a potential runway for sustained top-line growth and market share gains in coming years.
  
• Leveraging data analytics and artificial intelligence through new products (including joint AI solutions with Intellegam) will enable more sophisticated upsell/cross-sell opportunities and value-added features, which support margin expansion and growth in average revenue per customer.
  
• The accelerating shift towards multi-year subscription models and contract renewals with price increases-supported by high net revenue retention and improving customer stickiness-should improve earnings stability, cash flow generation, and predictability of future earnings.
  
• Strategic integration efficiencies (most notably between SimplePart and Microcat) and disciplined cost control are restoring and expanding operating leverage, driving both margin improvement and higher free cash flow that can support further product innovation or potential special dividends.

Infomedia Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Infomedia's revenue will grow by 7.0% annually over the next 3 years.
• Analysts assume that profit margins will increase from 11.4% today to 19.7% in 3 years time.
• Analysts expect earnings to reach A$35.4 million (and earnings per share of A$0.1) by about September 2028, up from A$16.7 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 24.2x on those 2028 earnings, down from 38.0x today. This future PE is lower than the current PE for the AU Software industry at 33.4x.
• Analysts expect the number of shares outstanding to grow by 0.7% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.99%, as per the Simply Wall St company report.

Infomedia Future Earnings Per Share Growth

Risks

• Ongoing customer churn risk, particularly in the SimplePart division, exposes Infomedia to potential revenue volatility, especially as upcoming major contracts for this segment are due for renewal in the second half of FY '26, which could negatively impact recurring revenue and overall earnings if not retained.
  
• Slowing revenue growth in key international markets, as evidenced by a revenue decline in the Americas (-4% YoY) and ongoing stabilization efforts in underperforming regions, suggests that geographic expansion outside APAC and EMEA may be limited, constraining long-term top-line growth relative to global peers.
  
• Heightened dependence on contract renewals and the ability to achieve price increases amidst OEM profitability pressures-driven by trade policy uncertainty and overcapacity, especially from Chinese OEMs-could make future pricing negotiations more challenging and lengthen sales cycles, ultimately squeezing margins and earnings growth.
  
• Continued investment required to rebuild core platforms (e.g., Infodrive CX) and pursue the AI strategy (Intellegam acquisition) may raise R&D and operational costs, risking net margin compression if incremental revenue and operational leverage are insufficient to offset increased expenses.
  
• SimplePart is described as "easier to exchange by an incumbent" compared to core Infomedia products, indicating heightened vulnerability to competitive displacement from low-cost, cloud-native SaaS entrants or OEMs developing in-house solutions, which could erode Infomedia's market share and future recurring revenue streams.

Valuation

• The analysts have a consensus price target of A$1.766 for Infomedia based on their expectations of its future earnings growth, profit margins and other risk factors.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be A$179.5 million, earnings will come to A$35.4 million, and it would be trading on a PE ratio of 24.2x, assuming you use a discount rate of 8.0%.
• Given the current share price of A$1.68, the analyst price target of A$1.77 is 4.9% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.