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4QFY11 results
Revenues grew 8.5%QQ with March being a seasonally stronger quarter
and importantly deferred revenues (a lead indicator of future revenues)
were up 29.3%QQ underlying the continued improvement in the job
market. Competition has intensified in the job classifieds segment but
InfoEdge’s flagship portal Naukri remains the market leader. 99acres is
doing well but losses from other investee businesses will continue to
impair margins. Wage hikes and higher advertising spend will also limit
margin performance in the near-term. With a strong market position in
core businesses (Jobs/Real Estate) and a measured expansion into new
areas, the years ahead holds a lot of promise for Info Edge. OPF stays.
Business momentum in recruitment remains strong
While the recruitment business grew 7.5%QQ in Mar-11, margins were
impacted by the poor performance in Info Edge’s offline job search business,
Quadrangle. A 29.3%QQ growth in deferred revenues (cash received but
revenues not recognised) is reflective of the continuing improvement in the
job market. Also, the Naukri Jobspeak index reaching pre-slowdown levels of
1085 indicates the buoyancy in overall hiring in India. Per Info Edge, the
threat from social networking sites is overstated as they focus more on niche
hiring whereas Naukri’s business model remains underpinned on mass hiring.
Increased activity by peers like Timesjobs has seen Naukri lose some share
off late but Info Edge remains confident of sustaining its share.
Advertising spend should go up; Jeevansathi remains troubled
Advertising expenses inched up in Mar-11 and upcoming quarters should
continue that trend. Continuing advertising campaigns for Naukri and
Jeevansathi and increase push in Shiksha will likely push the spend up. Wage
hikes are also due for its employees but the impact should be managed by
the strong growth in Naukri. Jeevansathi remains a problem area and no
quick fixes are forthcoming. Info Edge is trying to bring down customer
acquisition costs to limit losses in this business.
Inorganic growth critical for future stock performance
Investments in Mydala (deals website) and Noble Technologies (content
aggregator) continue Info Edge’s inorganic expansion into new areas. We
expect increased activity on this front with the Founder devoting his entire
time to scout for new acquisition opportunities. This also implies that there
could be some volatility on the margin front, especially as losses of some of
these ventures are absorbed. Barring Naukri, Info Edge has not been able to
create any cash cow and hence success in some of these new investments
remains critical for Info Edge’s stock performance. Given the management
quality, we are inclined to give Info Edge the benefit of doubt on this front.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
4QFY11 results
Revenues grew 8.5%QQ with March being a seasonally stronger quarter
and importantly deferred revenues (a lead indicator of future revenues)
were up 29.3%QQ underlying the continued improvement in the job
market. Competition has intensified in the job classifieds segment but
InfoEdge’s flagship portal Naukri remains the market leader. 99acres is
doing well but losses from other investee businesses will continue to
impair margins. Wage hikes and higher advertising spend will also limit
margin performance in the near-term. With a strong market position in
core businesses (Jobs/Real Estate) and a measured expansion into new
areas, the years ahead holds a lot of promise for Info Edge. OPF stays.
Business momentum in recruitment remains strong
While the recruitment business grew 7.5%QQ in Mar-11, margins were
impacted by the poor performance in Info Edge’s offline job search business,
Quadrangle. A 29.3%QQ growth in deferred revenues (cash received but
revenues not recognised) is reflective of the continuing improvement in the
job market. Also, the Naukri Jobspeak index reaching pre-slowdown levels of
1085 indicates the buoyancy in overall hiring in India. Per Info Edge, the
threat from social networking sites is overstated as they focus more on niche
hiring whereas Naukri’s business model remains underpinned on mass hiring.
Increased activity by peers like Timesjobs has seen Naukri lose some share
off late but Info Edge remains confident of sustaining its share.
Advertising spend should go up; Jeevansathi remains troubled
Advertising expenses inched up in Mar-11 and upcoming quarters should
continue that trend. Continuing advertising campaigns for Naukri and
Jeevansathi and increase push in Shiksha will likely push the spend up. Wage
hikes are also due for its employees but the impact should be managed by
the strong growth in Naukri. Jeevansathi remains a problem area and no
quick fixes are forthcoming. Info Edge is trying to bring down customer
acquisition costs to limit losses in this business.
Inorganic growth critical for future stock performance
Investments in Mydala (deals website) and Noble Technologies (content
aggregator) continue Info Edge’s inorganic expansion into new areas. We
expect increased activity on this front with the Founder devoting his entire
time to scout for new acquisition opportunities. This also implies that there
could be some volatility on the margin front, especially as losses of some of
these ventures are absorbed. Barring Naukri, Info Edge has not been able to
create any cash cow and hence success in some of these new investments
remains critical for Info Edge’s stock performance. Given the management
quality, we are inclined to give Info Edge the benefit of doubt on this front.
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