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§ Revenue in line but net profit falls short of expectation
Info Edge’s (IEL) Q4FY11 revenue, at INR 815 mn, was in line with expectation.
Net profit, at INR 269 mn, included a one-time gain of INR 51.7 mn, excluding
which it was lower than expectation. Overall, EBITDA margin stood at 34.9%,
down 170bps in a quarter that is historically strongest for the recruitment
business. Revenue from the recruitment segment grew 7.6% Q-o-Q to INR 667
mn with EBITDA margin declining to 43.9% from 48.7% a quarter ago.
§ Recruitment business on track to post 20% plus growth in FY12E
The company’s major business, i.e. recruitment segment, posted 24% growth in
FY11 with EBITDA margin of 41%. Further, with deferred sales also increasing to
INR 890 mn from INR 689 mn sequentially, we estimate the segment to grow
20% plus in the next fiscal. However, we would like to highlight that rising
competition from LinkedIn, which is making consistent headway in the
professional networking segment and increasing its recruitment footprint, could
be a threat. Further, we highlight that despite FY11 being a strong year of
business growth and lateral employee additions, IEL’s recruitment segment grew
a mere 24% and realizations per unique customer were up only 4.9% Y-o-Y.
§ Investments needed to scale up portals and boost site rankings
Over the past one and half year, we note that the India site rankings except for
99acres.com have gone down for Naukri.com, Jeevansathi.com and Siksha.com
(as per Alexa). We believe this may have been due to restricted spending on
advertisements and increasing traffic on eCommerce and social networking sites.
In FY11, we note that sales and marketing expense was lower than FY10 in
absolute terms. We believe, in FY12 management will have to invest significantly
on ad spending to increase traffic on portals. Management also alluded to
increasing ad spending on real estate and education portals.
§ Outlook and valuations: Reinvestments required; maintain ‘REDUCE’
While the revenue visibility remains healthy for recruitment segment in FY12, we
believe the reinvestments in business will restrict the net profit CAGR at levels
similar to overall revenue growth. We estimate 24% and 23% CAGR in revenues
and net profits, respectively over FY11-13E. At CMP of INR 732, the stock is
trading at a P/E of 41.4x and 31.2x, respectively. We believe it more than
factors anticipated upside from evolving businesses and hence reiterate our
‘REDUCE/ Sector Underperformer’ recommendation/rating on the stock
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
§ Revenue in line but net profit falls short of expectation
Info Edge’s (IEL) Q4FY11 revenue, at INR 815 mn, was in line with expectation.
Net profit, at INR 269 mn, included a one-time gain of INR 51.7 mn, excluding
which it was lower than expectation. Overall, EBITDA margin stood at 34.9%,
down 170bps in a quarter that is historically strongest for the recruitment
business. Revenue from the recruitment segment grew 7.6% Q-o-Q to INR 667
mn with EBITDA margin declining to 43.9% from 48.7% a quarter ago.
§ Recruitment business on track to post 20% plus growth in FY12E
The company’s major business, i.e. recruitment segment, posted 24% growth in
FY11 with EBITDA margin of 41%. Further, with deferred sales also increasing to
INR 890 mn from INR 689 mn sequentially, we estimate the segment to grow
20% plus in the next fiscal. However, we would like to highlight that rising
competition from LinkedIn, which is making consistent headway in the
professional networking segment and increasing its recruitment footprint, could
be a threat. Further, we highlight that despite FY11 being a strong year of
business growth and lateral employee additions, IEL’s recruitment segment grew
a mere 24% and realizations per unique customer were up only 4.9% Y-o-Y.
§ Investments needed to scale up portals and boost site rankings
Over the past one and half year, we note that the India site rankings except for
99acres.com have gone down for Naukri.com, Jeevansathi.com and Siksha.com
(as per Alexa). We believe this may have been due to restricted spending on
advertisements and increasing traffic on eCommerce and social networking sites.
In FY11, we note that sales and marketing expense was lower than FY10 in
absolute terms. We believe, in FY12 management will have to invest significantly
on ad spending to increase traffic on portals. Management also alluded to
increasing ad spending on real estate and education portals.
§ Outlook and valuations: Reinvestments required; maintain ‘REDUCE’
While the revenue visibility remains healthy for recruitment segment in FY12, we
believe the reinvestments in business will restrict the net profit CAGR at levels
similar to overall revenue growth. We estimate 24% and 23% CAGR in revenues
and net profits, respectively over FY11-13E. At CMP of INR 732, the stock is
trading at a P/E of 41.4x and 31.2x, respectively. We believe it more than
factors anticipated upside from evolving businesses and hence reiterate our
‘REDUCE/ Sector Underperformer’ recommendation/rating on the stock
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