Margin pressure due to the increased marketing spending – Info Edge

Margin pressure due to the increased marketing spending – Info Edge

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Excerpts from an interview of Mr. Chintan Thakkar, Wholetime Director and CFO at Info Edge with CNBC TV18 dated 31st January 2022:

  • The real way to look at the numbers is to look at the billing as well as cash EBITDA. The revenue is coming from the billings that happened in the 2QFY22, the billings are almost collected, and it’s an all-cash collection.
  • The overall margins are impacted due to an increase in spending on marketing and advertising expenses. The company is investing in its platforms, Jeevansathi, and in 99 acres. In 3QFY22, the Company’s EBITDA margin and PBT were impacted due to the increased spending in marketing and advertisement expenses in Jeevansathi and 99 acres.
  • The biggest growth driver for the company is recruitment solutions. There it has not increased its marketing spend in absolute numbers and the increase is marginal.
  • 3QFY22 was a strong quarter from a margins standpoint, particularly from the recruitment side. The strong momentum started from 3QFY21 has continued to do well. The increase in momentum is with the building up in the recruitment business and the company expects upside trend over there.
  • The overall paid listing has gone up on 99 acres. Increasing paid listing rather than the free listing is a part of the company’s overall strategy .
  • Info Edge started reinvesting in the real estate segment which was affected in FY21 due to the pandemic and the company expects the uptrend in the real estate business and has increased its spending as compared to last year.
  • On startup investment he said, the startup ecosystem is very vibrant and Info Edge also invests in the startups ecosystem as the company knows how the mechanism works there.
  • Info Edge continues to innovate and improve and is also investing in their products for the future growth of the company.
  • The company is focused on efficient growth on the top line as well as on the margins front. Other than that, the company invests in some of the startups and takes stake over there for the future growth of the company which is part of their overall strategy. The Company is balancing between current growth as well as the future growth of the company.
  • The company is seeing continued momentum and the company has not seen any major impact of omicron on the business and expects the 4QFY22 to also be a good quarter.

Asset Multiplier comments:

  • We believe that as the economic activities recover, the real estate sector will grow at a significant rate as well the robust hiring activities would support the revenue growth and positive operating leverage should support margins in the near term.
  • We expect the company’s investments in the startups to scale up in the near term and start contributing to the company’s valuation.

Consensus Estimate: (Source: TIKR website)

  • The closing price of Info Edge was ₹ 5,114/- as of 2-February-2022.  It traded at 143x/129x/125x the consensus Earnings per share estimate of ₹ 35.8/39.6 /40.9/- for FY22E/FY23E/FY24E respectively.
  • The consensus average target price is ₹ 5,648/- which implies a PE multiple of 138x on FY24E EPS of 40.9/-.

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

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