Info Edge

05 Oct

Multi-Year growth potential for all verticals – Infoedge

Update on the Indian Equity Market:

On Tuesday, NIFTY ended higher at 17,822. The top gainers in NIFTY50 were ONGC (+10.8%), INDUSINDBK (+5.0%), and COALINDIA (+4.2%). The top losers were CIPLA (-2.4%), HINDALCO (-2.1%), and SHREECEM (-1.8%). The top gaining sectors were OIL & GAS (+2.8%), IT (+1.2%), and MEDIA (+0.8%), while the top sectoral losers were REALTY (-1.4%), HEALTHCARE (-0.7%), and PHARMA (-0.5%).  

Edited excerpts of an interview with Mr. Hitesh Oberoi, CEO & MD, Info Edge with CNBCTV18 aired on 04th September 2021:

  • In the last few quarters, the job market, especially for engineers has not been of the type one has seen in maybe the last two decades. It’s a super-hot market with attrition rates for most companies going through the roof, talent is impossible to hire.
  • The company believes it is a rock-solid market, and it is slowly spreading now to the non-IT sectors as well. Starting with the IT market, which has been growing for the last three quarters but now, it’s now beginning to spread to the other sectors as well, as the Indian economy starts to recover.
  • There is a limited pool of talent, every company wants to go digital and companies have brought forward their multi-year plans. Companies that were hoping to get 30-50 percent of their business to come from digital in the next five years are now hoping that 70 percent of their business will be digital in the next two years.
  • The fact that there are remote working opportunities, people are able to get jobs not just in India but even overseas. There is this massive surge right now, one cannot overnight produce a lot of engineers, or overnight upskill them. Unless the demand is hit for some reason, the situation will continue to be like this for the next few quarters as well.
  • The company is a pure-play internet company that runs an online job portal Naukri.com. It has massively benefitted from this uptick in the employment market and has managed to translate that to revenue growth as well.
  • The company is also bullish on the growth prospects of its other website 99acres.com, a real estate classifieds platform due to demand pick-up post lock down impact. According to him, growing prices, demand pick up across the country, cheaper credit availability are all signs of a multi-year growth cycle for real estate.
  • The Wedding cycle is also poised to pick up with more liberal government policies and the pent-up demand due to lockdowns that had brought this industry to a stand -still, the upcoming festive and wedding season bodes well for Matrimony.com.
  • Infoedge continues to be a startup incubator and aggregator with investments across startups like Zomato and Policy Bazaar and the company will continue to be on the lookout for strategic acquisitions in the startup ecosystem which is currently in a valuation bubble.
  • The Company is planning to launch an in-house blue-collar job portal called JobHai which is currently in the test marketing stage and also has made strategic investments in real estate, jobs, and education verticals.
  • The company has significant cash and capital balances to fund more startups and acquisitions to expand its portfolio and will look at listing each of its businesses separately if it believes that will help shareholders unlock more value.

Asset Multiplier Comments

  • The intensity of digital penetration across India has increased over the past few years, however, there is a lot more value to be unlocked for companies like Infoedge by expanding across India.
  • Infoedge has created a value chain through its verticals and strategic acquisitions that range from education to jobs, insurance to real estate, and now food delivery, which will likely consolidate its presence as the undisputed leader of internet-based aggregators in India.

Consensus Estimate (Source: market screener website)

  • The closing price of Infoedge was ₹ 6,493/- as of 05-Oct-21. It traded at 193x/148x/118x the consensus EPS estimate of ₹ 36/47/59 for FY22E/ FY23E/FY24E respectively.
  • The consensus target price of ₹ 6,520/- implies a PE multiple of 111x on FY24E EPS of ₹ 59/-.

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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10 Sep

Jeevansathi was the only business which did well in Q1: Info Edge

Update on the Indian Equity Market:
On Wednesday, NIFTY closed in the red at 11,278 (-0.3%). The top gainers in NIFTY50 were Tata Steel (+3.6%), Zee (+3.1%) and Cipla (+2.7%). The top losers were SBI (-4.1%), GAIL (-3.4%), and Bajaj FInserv (-2.9%). The top sectoral gainers were PHARMA (+1.9%), MEDIA (+1.2%) and METAL (+0.9%) and Top sectoral losers were PSU BANK (-2.9%), BANK (-2.1%), and PVT BANK (-1.8%)

Excerpts of an interview with Mr Hitesh oberoi, MD and CEO, Info Edge with ET now dated 8th September 2020:
• They were impacted by the lockdown in April and May and that resulted in billing stopping by 44% but revenue was down only 10% because we benefited from deferred revenue of previous quarters.
• The billing growth of the previous quarters helped them and resulted in revenue decline of only 10%. Cost declined by about 17% and therefore EBITDA went up. But yes this billing growth will impact revenue growth in the coming quarters.
• Q1 was very badly impacted by both 99acres and Naukri. Requirement billings were down 44% and real estate billings were down 71%. But they have seen a recovery of some sorts in the last couple of months.
• Traffic on all their portals is back to near base level and they are back to where they were at the same time last year. On some metrics they are showing healthy growth.
• In July and August, their billings were tracking at 80% of what it was last year. So there has been a handsome recovery in July and August
• September is their biggest month in this quarter, almost half of the collections happen in September. So if September is good, that will give them much more confidence going forward.
• In July and August they have seen job seekers come back with a bang. So job seeker activity on the site is at an all-time high. They are seeing more app downloads. They are seeing more applications, more resumes being modified, more people registering
• Recruiter activity which had slowed down considerably in April, May and June, has also started inching up. They are back to 65-70% levels in Naukri
• They have seen a handsome recovery in IT. They are seeing reasonable sort of activity in sectors like healthcare, education, pharmaceuticals, insurance. But sectors like travel, hospitality, tourism, retailing, apparels all these sectors continue to be impacted by the slowdown. They are yet to show any signs of recovery.
• Jeevansathi was actually the only business in their portfolio which did well in Q1. It kept growing through the lockdown as well. Jeevansathi billings grew by 13% in Q1 and in the month of July and August the billings growth has been even better. In August, they grew billings by 23% in Jeevansathi.
• They are constantly on the lookout for investing in or acquiring both for strategic and financial purposes. They have an AI of sorts through which they make their financial investments.
• They just finished raising $250 million through their QIP. So they are now sitting on close to Rs 3,300 crore of cash.
• The purpose of this QIP was to look around for acquisitions and inorganic sort of opportunities in the spaces they operate. Their preference would be to do a deal at some point in time in the next 12 to 18 months in either matrimony or real estate or education.
• Zomato also had a terrible Q1 but business has come back strongly in Q2. The dining out part of the business has been more impacted because many of the restaurants are still shut but delivery is picking up. The company has done a very good job of cutting burn.
• Burn is now down to maybe $2-3 million a month from maybe $30-40 million a month a year ago. So, they have done a fantastic job on that front where unit economics is improved. They are making a profit per order now where they were losing maybe 35-40 cents to an order earlier.
• Covid has told us is that the world is all about essential services and clearly some of the services they offer are essential in nature to more middle class Indians.
• On the whole, you will see a more aggressive Info Edge. Of course, a lot will depend on what happens to India as a whole. At the end of the day, their businesses are index to GDP growth.
• They are very well positioned. Their Naukri business is very profitable and the two other categories they operate in are matrimony and real estate.
• Covid crisis is likely to throw up opportunities because a lot of companies have been very negatively impacted by it and hopefully there will be many more opportunities going forward than there were in the last three years.

Consensus Estimate: (Source: market screener and investing.com websites)
● The closing price of Info Edge was ₹ 3,270/- as of 09-September-2020. It traded at 128x/ 93x/ 69x the consensus earnings estimate of ₹ 25.6/ 35.2/ 47.5 for FY21E/22E/FY23E respectively.
● The consensus price target is ₹ 2599/- which trades at 55x the earnings estimate for FY23E of ₹ 47.5/-

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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