Info Edge stock rally continues on strong Q4

Info Edge (India) reported good numbers for the fourth quarter of 2022-23 (Q4FY23) given depressed conditions in the Key IT segment.

The billing growth of 13.7 per cent year-on-year in recruitment was well ahead of market expectations. There was solid growth in realisations (up 5.5 per cent) as well as unique customers (up 7.7 per cent). Billings were also ahead of expectations in real estate (up 30.8 per cent year-on-year or YOY) and Shiksha (up 42.5 per cent YOY).

Consolidated revenues of ~2,158 crore for FY23 showed 38 per cent YOY growth over FY22 while Ebitda (earnings before interest, tax, depreciation and amortisation) of ~784 crore, meant growth of 69 per cent and margin expansion of 695 basis points (bps).

PAT (profit after tax) of ~411 crore, was not comparable to FY22 when the listing of Zomato led to an extraordinary ~9,677 crore rise in other income.

Management sees clear signs of a slowdown in IT hiring that remains a key risk, given its high revenue contribution from the Naukri business. However, the firm is hopeful of a strong rebound in IT hiring in the second half of FY24. Meanwhile, non-it hiring has picked up well and growth there should offset some of the impact from slowdown in IT hiring. In Q4, revenue was at ~564 crore (up 23.8 per cent YOY, 1.6 per cent quarteron-quarter or QOQ). Naukri added 1 million resumes (QOQ) in Q4 to end at 89 million resumes, with 20,000 of them added daily. The listings on the 99acres platform improved by 10.6 per cent QOQ to 1.191 million. The real estate business, 99acres posted a strong Q4FY23 and demand is likely to remain robust with all-time low inventory, new launches and good demand for new homes. Due to improvements on the platform, traffic has increased while reducing marketing expenses. But marketing spends still remain elevated and are likely to result in continued losses for 99acres over the next few years.

Management says there is strong demand for hiring in BFSI (banking, financial services and insurance), retail, construction, real estate, and travel and hospitality domains while consumer durables, FMCG, healthcare and education have seen growth moderation. The company is confident about sustaining current margins if billings grow by 1415 per cent in FY24. It is optimising the search and recruitment engine to focus more on non-it hiring and remains confident of a healthy growth from the non-it segment.

If the economy grows at healthy rates (6-7 per cent) the company is confident of delivering 3-times GDP growth rates. It currently operates only in 40-45 cities and plans to expand its offerings in smaller cities that can generate healthy contributions in the longer term. It has reduced discounts and increased pricing in Q4FY23 though it had to provide some discounts on the IT hiring side due to the slowdown. It expects pricing on IT billings to revert once growth normalises.

Rebound in domestic demand drove strong growth in Siksha and there was a significant reduction in ad spends in Jeevansathi (matrimonial portal) which recorded good engagement and high traffic as its chat feature was made free. Competitive intensity in the space remained high and competitors also spend aggressively.

While the stock is trading at ~4,215.65 (up 3.3 per cent on Thursday; it is up 8.1 per cent since results last Friday), most analysts remain positive even though it is highly valued and a key market is seeing slowdown. According to Bloomberg, 12 of the 17 analysts polled after Q4 are bullish (‘add/buy’), while three have ‘sell’ ratings and two are ‘neutral’; their average target price is ~4,704.