Info Edge (INFOE IN, INR 736, Reduce)
We recently met Info Edge’s (IEL) management to understand its latest business update and outlook. While Naukri remains a key growth driver, the real estate segment is showing better traction and is likely to aid growth going forward. Given the uncertain macro environment, we believe, along with recruitment business, growth in non-recruitment business and other investee companies is key to overall growth. At P/E of 23.8x FY14E, we maintain ‘REDUCE’ on the company.
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Naukri to remain the growth engine
Info Edge continues to lead the recruitment market with Naukri up a robust 25% for FY12. With traffic share of over 60%, the portal is likely to remain the company’s key growth driver, going forward. However, we believe the current macro economic uncertainty could impact growth in FY13. Management stated if growth in Naukri remains at 20-25%, then it is likely to maintain its EBITDA margin (51% in FY12).
99acres and Shiksha gaining traction
Despite high interest rates last year, 99acres grew a robust 52% in FY12 and has been EBITDA positive for past two years. Management expects traction to continue in this segment. Its online education portal Shiksha.com too is witnessing strong momentum (revenue of INR110mn in FY12), albeit on a lower base. However, Jeevansaathi.com, the matrimonial portal is a laggard.
Outlook and valuations: Expensive; maintain ‘REDUCE’
The stock has run up 21% in the past six months, but the current macro environment could impact growth rates in the recruitment segment. Hence, we believe, non-recruitment segments and investee companies need to put up a good show to drive overall growth. Thus, we maintain our ‘REDUCE / SU’ rating. At CMP of INR736, the stock is trading at P/E of 30.1x and 23.8x FY13E and FY14E standalone earnings, respectively.
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