Healthy recovery in Naukri… • InfoEdge - BUY :: ICICI Securities, PDF link

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Healthy recovery in Naukri…
• InfoEdge reported mixed Q2FY15 earnings. Reported revenues grew
19.4% YoY and 1.8% QoQ to | 147.6 crore (| 149.5 crore estimate)
led by 33% YoY growth in 99acres and 19% growth in the flagship
Naukri business
• At 28.6%, EBITDA margins declined 535 bps QoQ and came below
our 33.8% estimate, led by higher advertising expenses in 99acres
• Reported PAT of | 33.2 crore was also below our estimate of | 38.2
crore led by lower operating margins. The company announced an
interim dividend of | 1/share
Readings from August 2014 Naukri Job speak Index (JSI)
Naukri Job Speak Index for August 2014 stood at 1,478, growth of 23%
YoY. IT-software index grew 31% YoY to 1,929 while BPO-ITeS index
rose 36% to 1,426. Majority of sectors including auto, telecom, BFSI and
pharma saw a healthy 15%, 56%, 36%, and 16% YoY growth to 957, 827,
1,567, and 1,602, respectively.
Naukri grew at its fastest clip since Q1FY13 …
We expect InfoEdge to deliver FY14-16E revenue CAGR of 24.6%, above
its FY09-14 CAGR of 18.3% primarily led by Naukri business. For FY15E,
we expect revenues to grow 24% led by recovery in the Naukri business
and market share gains from competition, continued traction in 99acres
and growth in other businesses (Zomato, Canverra Technologies).
Modest growth in FY14 (20%), relative to historical average was led by
softness in flagship recruitment business (9.8%) despite a healthy growth
in other verticals (36%) and investee companies.
Builds warchest to protect 99acres turf…
InfoEdge raised | 750 crore by offering 1.01 crore shares at | 740 apiece
(3.5% discount to floor price of | 766.89 as decided during the AGM). The
company plans to use the proceeds primarily for 99acres to invest in 1)
expanding to more cities (80% of additional hiring is in 99acres during
Q1FY15), 2) product development, 3) data quality and verification
services, 4) analytics, 5) mobile app (>30% of traffic generated is from
mobile) and 6) acquisitions.
Naukri growth may drive margin expansion
At 28.6%, Q2 margins were 515 bps below our 33.8% estimate led by
higher advertising spends. We are modelling consolidated margins of
25.1% for FY15E vs. 17.1% in FY14, led by recovery in Naukri business
partially offset by business reinvestments and losses in other verticals.
Recall, during FY09-14, consolidated EBITDA margins declined 10
percentage points (pp) to 17% led by higher losses in subsidiaries and
investee companies, and tepid growth in recruitment business. While
recruitment margins improved to 50.5% in FY14 vs. 41.5% in FY10, losses
in other verticals expanded to | 19 crore vs. | 13.7 crore in FY10 led by
business investments and rising competition in real estate business.
As anticipated, Naukri revives which remains long term positive
We maintain our estimates and expect revenue, PAT CAGR of 25%, 44%,
respectively, during FY14-16E as overall hiring outlook could likely
improve led by IT while investee companies could outgrow company
average growth. We maintain our DCF based target price of | 950 which
discounts our FY16E EPS estimate of | 15.5 by 54x. Though valuations
appear rich, the shares are a play on economic recovery.

Link
http://content.icicidirect.com/mailimages/IDirect_InfoEdge_Q2FY15.pdf