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Info Edge reported a decent 2Q FY12 with 5.1% Q/Q revenue growth and
gross margin expansion of 210bp. Recruitment services, the most important
segment of the company which contributes almost all of Info Edge’s value,
reported revenue growth of ~27% Y/Y (6.7% Q/Q). An important highlight of
the quarter was a meaningful increase in advertising revenues, which increased
to 16% of revenues from about 13% last quarter. It highlights management’s
focus on expansion/retention of market share in the long term, as opposed to
maximizing profitability in the short term, which we view as a positive.
Recruitment services business should comfortably achieve 25%+ revenue
growth in FY12E despite concerns about softening business environment as
Naukri.com retains its relatively uncontested leadership. The commentary
from major IT companies (IT sector contributes 25% of Naukri.com revenues)
suggests that the demand environment is still robust despite macro concerns.
However, management pointed to moderation in collection growth, which needs
to be watched, but we believe it is too early to raise the alarm.
99acres' (the online real estate classified of Info Edge) sequential revenue
growth remained muted (though positive) in 2QFY12. We acknowledge that the
business might face difficulties in the short-term due to high interest rates and
the High Court ruling regarding land acquisition (primarily in Noida and Delhi
region). But we remain confident about the long-term growth potential of
this business given 99acres.com’s leadership position, and underlying
demographics in India. Besides, Info Edge has also the resources to invest in
making 99acres as the real estate portal of choice in India.
We reassert that the online portal business has high operating leverage and
strong revenue growth should drive margin expansion. Naukri.com's ~54%
EBITDA margin in 2QFY12 is a testiment to that, and we believe 99acres.com
has the potential to gain meaningful scale which, supported by operating
leverage, could drive a meaningful EBITDA contribution.
Revenue visibility for FY12 continues to be high, an indicator of which is
deferred sales revenues of Rs918MM. These will be recognized over the next
3-4 quarters making up about 25% of estimated revenues for the next 4 quarters.
We maintain our OW with a new price target of Rs820. Recruitment services
business makes up most of the value, while 99acres contributes the remainder.
We do not provide any value for the other businesses/portals in our price target
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Info Edge reported a decent 2Q FY12 with 5.1% Q/Q revenue growth and
gross margin expansion of 210bp. Recruitment services, the most important
segment of the company which contributes almost all of Info Edge’s value,
reported revenue growth of ~27% Y/Y (6.7% Q/Q). An important highlight of
the quarter was a meaningful increase in advertising revenues, which increased
to 16% of revenues from about 13% last quarter. It highlights management’s
focus on expansion/retention of market share in the long term, as opposed to
maximizing profitability in the short term, which we view as a positive.
Recruitment services business should comfortably achieve 25%+ revenue
growth in FY12E despite concerns about softening business environment as
Naukri.com retains its relatively uncontested leadership. The commentary
from major IT companies (IT sector contributes 25% of Naukri.com revenues)
suggests that the demand environment is still robust despite macro concerns.
However, management pointed to moderation in collection growth, which needs
to be watched, but we believe it is too early to raise the alarm.
99acres' (the online real estate classified of Info Edge) sequential revenue
growth remained muted (though positive) in 2QFY12. We acknowledge that the
business might face difficulties in the short-term due to high interest rates and
the High Court ruling regarding land acquisition (primarily in Noida and Delhi
region). But we remain confident about the long-term growth potential of
this business given 99acres.com’s leadership position, and underlying
demographics in India. Besides, Info Edge has also the resources to invest in
making 99acres as the real estate portal of choice in India.
We reassert that the online portal business has high operating leverage and
strong revenue growth should drive margin expansion. Naukri.com's ~54%
EBITDA margin in 2QFY12 is a testiment to that, and we believe 99acres.com
has the potential to gain meaningful scale which, supported by operating
leverage, could drive a meaningful EBITDA contribution.
Revenue visibility for FY12 continues to be high, an indicator of which is
deferred sales revenues of Rs918MM. These will be recognized over the next
3-4 quarters making up about 25% of estimated revenues for the next 4 quarters.
We maintain our OW with a new price target of Rs820. Recruitment services
business makes up most of the value, while 99acres contributes the remainder.
We do not provide any value for the other businesses/portals in our price target
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