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Info Edge reported the July 2011 JobSpeak Index (recruiter activity on its jobs portal), which
was down 6.6% mom, back to February 2011 levels. While a month's data is not conclusive
(August data to be out in a week), the stock's significant 32% ytd outperformance to the BSE
IT Index is a near term headwind.
JobSpeak index surprisingly declines mom, a pullback to Feb-11 levels
Info Edge released its July 2011 monthly data on recruiter activity, the JobSpeak Index,
which represents recruiter activity in terms of posting new jobs and refreshing existing
jobs on its flagship job portal, Naukri.
Since the Index was constituted in Jul 2008, it has been a fairly accurate precursor on
revenue inflexion points.
For instance, the JobSpeak Index declined by 9.3% during the Sep 2008 quarter, post
which Info Edge revenues declined by 9.9% in the Dec 2008 quarter. Similarly the Index
recovered from Jun 2009, which was followed by a revenue bounce back from Sep 2009
quarter.
The Index for July 2001 was down 6.6% mom to 1,055. This retraces back to the level of
Feb 2011. Barring a minor dip in April 2011, the index has seen a steady mom
improvement since Dec 2010.
While the macro economic uncertainty on the global slowdown/sovereign debt crisis
increased in August 2011, a dip prior to this period when negative newsflow was
relatively modest comes as a negative surprise.
Performance in key sectors was worse than the headline number
We estimate that IT/ITES sectors represent around 45% of Info Edge’s recruitment segment
revenues, including indirect hiring through recruitment firms in addition to direct company
hiring.
The index for the IT sector for Jul 2011 was down by 11.4% mom, again at the lowest level
since Feb-11. Meanwhile, the Index for the BPO/ITES was down by over 24% mom, the
lowest since Dec 2009
At a broader level, 19 out of 41 sectors reported negative mom reading including several
domestic sectors like Construction & Engineering, Oil & Gas and Insurance.
Significant ytd outperformance to the IT sector is a headwind for the stock
While Info Edge has been diversifying its revenue streams over the years, the recruitment
vertical still represents over 80% of its standalone revenues and over 100% of its standalone
EBITDA, and hence remains key to earnings outlook.
The August 2011 JobSpeak Index data is due for release by the end of the week, according
to our checks with management, which should give us a better sense on the hiring trajectory.
The weak print on JobSpeak and uncertainty around the near-term prospects of the Indian IT
sector and macro uncertainties certainly raise challenges for lateral hiring outlook over the
next couple of quarters.
The stock has seen a major outperformance - up 4% ytd versus a 28% decline in the BSE IT
Index, despite being a leveraged play on lateral hiring, particularly in the Indian IT sector.
Given rich headline valuation of 32x FY13F P/E, any negative data points can impact share
price performance.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Info Edge reported the July 2011 JobSpeak Index (recruiter activity on its jobs portal), which
was down 6.6% mom, back to February 2011 levels. While a month's data is not conclusive
(August data to be out in a week), the stock's significant 32% ytd outperformance to the BSE
IT Index is a near term headwind.
JobSpeak index surprisingly declines mom, a pullback to Feb-11 levels
Info Edge released its July 2011 monthly data on recruiter activity, the JobSpeak Index,
which represents recruiter activity in terms of posting new jobs and refreshing existing
jobs on its flagship job portal, Naukri.
Since the Index was constituted in Jul 2008, it has been a fairly accurate precursor on
revenue inflexion points.
For instance, the JobSpeak Index declined by 9.3% during the Sep 2008 quarter, post
which Info Edge revenues declined by 9.9% in the Dec 2008 quarter. Similarly the Index
recovered from Jun 2009, which was followed by a revenue bounce back from Sep 2009
quarter.
The Index for July 2001 was down 6.6% mom to 1,055. This retraces back to the level of
Feb 2011. Barring a minor dip in April 2011, the index has seen a steady mom
improvement since Dec 2010.
While the macro economic uncertainty on the global slowdown/sovereign debt crisis
increased in August 2011, a dip prior to this period when negative newsflow was
relatively modest comes as a negative surprise.
Performance in key sectors was worse than the headline number
We estimate that IT/ITES sectors represent around 45% of Info Edge’s recruitment segment
revenues, including indirect hiring through recruitment firms in addition to direct company
hiring.
The index for the IT sector for Jul 2011 was down by 11.4% mom, again at the lowest level
since Feb-11. Meanwhile, the Index for the BPO/ITES was down by over 24% mom, the
lowest since Dec 2009
At a broader level, 19 out of 41 sectors reported negative mom reading including several
domestic sectors like Construction & Engineering, Oil & Gas and Insurance.
Significant ytd outperformance to the IT sector is a headwind for the stock
While Info Edge has been diversifying its revenue streams over the years, the recruitment
vertical still represents over 80% of its standalone revenues and over 100% of its standalone
EBITDA, and hence remains key to earnings outlook.
The August 2011 JobSpeak Index data is due for release by the end of the week, according
to our checks with management, which should give us a better sense on the hiring trajectory.
The weak print on JobSpeak and uncertainty around the near-term prospects of the Indian IT
sector and macro uncertainties certainly raise challenges for lateral hiring outlook over the
next couple of quarters.
The stock has seen a major outperformance - up 4% ytd versus a 28% decline in the BSE IT
Index, despite being a leveraged play on lateral hiring, particularly in the Indian IT sector.
Given rich headline valuation of 32x FY13F P/E, any negative data points can impact share
price performance.
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