Info Edge - Recruitment Momentum Intact, But 99acres Losing Steam; Result Update Q3FY15 :: Edelweiss, report

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Info Edge’s (IEL) Q3FY15 revenue at INR1,457mn (down 1.2% QoQ) was below our INR1,515mn estimate. EBITDA margin at 24.9% plummeted 370bps QoQ due to investments in 99acres. The recruitment segment, up 19.0% YoY, continued previous quarter’s momentum. However, 99acres clocked ~20% YoY growth versus past 12 quarters’ over 30% run rate. Management stated that it will continue to invest in the portal in order to cement its leadership. Though we are confident that these investments will yield rich dividends over the long run, they will undoubtedly take a toll on near-term margins. Hence, we revise down our FY16E EBITDA margin to 34% from 37% earlier, leading to 8% cut in our FY16E EPS as well. However, we foresee the company benefitting from rising internet penetration as its investments in both organic segments and investee companies fructify.

Naukri gathering steam; 99acres losing pace

Naukri, the recruitment segment, grew 19.0% YoY on the back of  18.7% YoY growth in Q2FY15, while non-recruitment segments surged 16.0% YoY. As economic activity picks up in ensuing quarters we anticipate the hiring activity to gather pace as well. Ergo, Naukri, the leader in the segment, will be one of the key beneficiaries. 99acres’ growth continued to moderate to 20% YoY (32% and 57% in Q2FY15 and Q1FY15) as a few real estate markets continued to remain soft.

Investments to continue in 99acres and other investee companies

IEL reiterated its intention of continuing investments, particularly in 99acres and investee companies. We believe these are necessary to augment its leadership and will benefit the company in the long run. It recently raised stake in Zomato (online food guide portal) by infusing INR1.85bn.

LINK
https://www.edelweiss.in/research/Info-Edge--Recruitment-Momentum-Intact,-But-99acres-Losing-Steam;-Result-Update-Q3FY15/28064.html