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Info Edge (India) Ltd.
Strong Performance in Core
Business; Rising Losses in
Subsidiaries Keep Us on the
Sidelines; EW
What's Changed
FY12e/FY13e EPS Down by 4.6%/4.8%
Quick Comment: Info Edge reported strong standalone
revenue growth and margins ahead of our expectations
despite a seasonally low quarter. However, we note that
the disproportionate investments in its subsidiary
businesses led to net income coming in ~26% below the
standalone profits in F2011. For F1Q, we suspect the
consolidated net income could be at least 10-20% below
reported net income.
Strong standalone Jun-11 results: Revenue
increased to Rs866.5mn (+6.4% QoQ, +31.5% YoY) in a
seasonally weak quarter. Due to flat to lower ad
expenses, EBIT margin improved to 34.1% (+212bp
QoQ, +517bp YoY). Historically EBIT margins have
declined QoQ in F1Q for Info Edge. Overall net income
of Rs256mn (-4.8% QoQ, +48% YoY) appears strong.
Rising losses in subsidiary businesses is a
concern: Losses in subsidiaries have been 5%, 8%,
and 26% of standalone profits over the last three years,
respectively. Given lack of visibility on subsidiary losses,
we suspect rising investments in the segment could lead
to F2012 reported profits coming in significantly below
(est. 10-20%) our expected net income estimates.
Financials: We expect Info Edge to deliver strong
revenue and net income CAGR of 23% and 21%,
respectively, over F2012-14e. Currently, the stock is
trading at 41x F2012e EPS and 34x F2013e EPS.
However, current valuations could be understated by
10-20%, in our view, if subsidiary losses continue. With
valuations at multi-year highs, we would wait for more
attractive entry levels for the stock. Maintain EW.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Info Edge (India) Ltd.
Strong Performance in Core
Business; Rising Losses in
Subsidiaries Keep Us on the
Sidelines; EW
What's Changed
FY12e/FY13e EPS Down by 4.6%/4.8%
Quick Comment: Info Edge reported strong standalone
revenue growth and margins ahead of our expectations
despite a seasonally low quarter. However, we note that
the disproportionate investments in its subsidiary
businesses led to net income coming in ~26% below the
standalone profits in F2011. For F1Q, we suspect the
consolidated net income could be at least 10-20% below
reported net income.
Strong standalone Jun-11 results: Revenue
increased to Rs866.5mn (+6.4% QoQ, +31.5% YoY) in a
seasonally weak quarter. Due to flat to lower ad
expenses, EBIT margin improved to 34.1% (+212bp
QoQ, +517bp YoY). Historically EBIT margins have
declined QoQ in F1Q for Info Edge. Overall net income
of Rs256mn (-4.8% QoQ, +48% YoY) appears strong.
Rising losses in subsidiary businesses is a
concern: Losses in subsidiaries have been 5%, 8%,
and 26% of standalone profits over the last three years,
respectively. Given lack of visibility on subsidiary losses,
we suspect rising investments in the segment could lead
to F2012 reported profits coming in significantly below
(est. 10-20%) our expected net income estimates.
Financials: We expect Info Edge to deliver strong
revenue and net income CAGR of 23% and 21%,
respectively, over F2012-14e. Currently, the stock is
trading at 41x F2012e EPS and 34x F2013e EPS.
However, current valuations could be understated by
10-20%, in our view, if subsidiary losses continue. With
valuations at multi-year highs, we would wait for more
attractive entry levels for the stock. Maintain EW.
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