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2QFY12 results
The soft economic environment in India has taken a toll on InfoEdge’s
flagship Naukri’s business. While revenue growth at 29%YY came in
strong, collections (proxy for future revenues) dropped QQ for the first
time in 2 years indicating growth challenges ahead. Investee companies
continue to show strong growth, but are consuming a lot of cash and
InfoEdge has infused another round of funding in most. The difficult
environment in India caps any near-term upsides to InfoEdge’s financials.
While we maintain an Outperform, lack of upsides in the core business
implies a dull phase for the stock in the near term.
Hiring environment looking soft
InfoEdge’s JobSpeak Index which tracks recruitment activity in their flagship
portal has stayed flat since Feb-2011, indicating a stagnant hiring
environment. Deferred revenues (an indicator of future revenues) declined
QQ for the first time in 7 quarters and will likely impact revenue growth in
future quarters. Hiring slowdown is evident across all industries with
insurance, telecom and real estate the key pain points. Rising interest rates
and issues in InfoEdge’s key market of Noida has taken a toll on growth in
99acres. Revenue growth here has slowed down to the 40s after a 70%
growth in FY11. Company-wide revenues were up 29%YY to Rs919m.
Investee companies to keep overall profitability muted
InfoEdge reported a 50bpsQQ decline in Ebitda margins as advertising
campaign for 99acres inflated costs. However, as the campaign ramps down,
advertising costs will also revert to the normal run-rate. Investments in
Mydala (daily deals website), 99labels (e-commerce for fashion merchandise)
and Nogle Technologies (content aggregator) continue InfoEdge’s inorganic
expansion into new areas. The six investee companies delivered Rs230m in
revenues in 1H12, but also brought about Rs140m of operating losses. While
revenues from them are set to double, losses will more than double in the
near term as these companies scale up.
Success beyond Naukri essential for the next leap in the stock
While steady performance from core verticals is reassuring, the next leap for
Info Edge’s stock will come from success in one or more of the investee
companies. Barring Naukri, Info Edge has been unable to create any cash cow
in its stable and the wait for investee companies to generate returns
continues. That said, the quality of management does extract a benefit of
doubt. While we retain an OPF rating, we expect the stock to be dead money
in the near-term as InfoEdge grapples with the cyclical economic challenges.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
2QFY12 results
The soft economic environment in India has taken a toll on InfoEdge’s
flagship Naukri’s business. While revenue growth at 29%YY came in
strong, collections (proxy for future revenues) dropped QQ for the first
time in 2 years indicating growth challenges ahead. Investee companies
continue to show strong growth, but are consuming a lot of cash and
InfoEdge has infused another round of funding in most. The difficult
environment in India caps any near-term upsides to InfoEdge’s financials.
While we maintain an Outperform, lack of upsides in the core business
implies a dull phase for the stock in the near term.
Hiring environment looking soft
InfoEdge’s JobSpeak Index which tracks recruitment activity in their flagship
portal has stayed flat since Feb-2011, indicating a stagnant hiring
environment. Deferred revenues (an indicator of future revenues) declined
QQ for the first time in 7 quarters and will likely impact revenue growth in
future quarters. Hiring slowdown is evident across all industries with
insurance, telecom and real estate the key pain points. Rising interest rates
and issues in InfoEdge’s key market of Noida has taken a toll on growth in
99acres. Revenue growth here has slowed down to the 40s after a 70%
growth in FY11. Company-wide revenues were up 29%YY to Rs919m.
Investee companies to keep overall profitability muted
InfoEdge reported a 50bpsQQ decline in Ebitda margins as advertising
campaign for 99acres inflated costs. However, as the campaign ramps down,
advertising costs will also revert to the normal run-rate. Investments in
Mydala (daily deals website), 99labels (e-commerce for fashion merchandise)
and Nogle Technologies (content aggregator) continue InfoEdge’s inorganic
expansion into new areas. The six investee companies delivered Rs230m in
revenues in 1H12, but also brought about Rs140m of operating losses. While
revenues from them are set to double, losses will more than double in the
near term as these companies scale up.
Success beyond Naukri essential for the next leap in the stock
While steady performance from core verticals is reassuring, the next leap for
Info Edge’s stock will come from success in one or more of the investee
companies. Barring Naukri, Info Edge has been unable to create any cash cow
in its stable and the wait for investee companies to generate returns
continues. That said, the quality of management does extract a benefit of
doubt. While we retain an OPF rating, we expect the stock to be dead money
in the near-term as InfoEdge grapples with the cyclical economic challenges.
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