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Info Edge (IEL) Q3FY12 revenues were marginally lower than expectations
while net profits were in line. Overall, revenues stood at INR920mn (up
22.5% YoY and flat QoQ) and net profits at INR289mn (up 31.6%YoY and
2.2% QoQ). Recruitment revenues (up 20% YoY) have continued to
decelerate, impacted by a slowing economy that took a toll on hiring
trends across industries. We note that while Q4 has historically been the
strongest quarter for IEL, due to the current slowdown in domestic
economy, growth deceleration is likely to continue. This has been amply
reflected in the deferred sales growth trend (up 34% YoY, down from
over 50% YoY growth two quarters back). While, we do not see a
meaningful downside in the stock from hereon, slowing growth will keep
the stock performance muted. We thus maintain our ‘REDUCE’ rating.
Hiring slowdown could impact pricing as well
Revenues from recruitment segment grew at 20% YoY, the lowest in the past seven
quarters. However, operating margins continued its upward trend, reaching 50.7%.
Deferred sales revenues stood flat QoQ at INR924mn, impacted by the slowdown in
domestic economy. Further, we believe IEL may have to offer higher sales discounts
that will impact pricing in the next one‐two quarters.
Real estate segment sustains growth momentum
Despite the slow deal momentum and high interest rates, online real estate segment
continued to see traction. This quarter also this segment grew 50% YoY as the company
has continued its investment in terms of products and sales. Total listings on the portal
have scaled to 320,000 (up 63% YoY). While globally, real estate is one of the largest
segments in the online classifieds space, in India, it still is at a nascent stage and
unlikely to provide much growth to IEL in near term.
Outlook and valuations: Moderating growth; maintain ‘REDUCE’
We do not see any meaningful downside to the stock from current levels. However, the
stock performance will remain muted due to the slowdown in the hiring activity. We
thus maintain our ‘REDUCE / Sector Underperformer’ rating. At CMP of INR592, the
stock is trading at P/E of 28.9x and 24.7x FY12 and FY13 earnings, respectively.
Company Description
IEL is amongst India’s leading online classified companies, with presence in online
recruitment, matrimony, real estate, and offline executive search. It pioneered the online
recruitment business under its flagship brand Naukri.com and operates offline recruitment
business under the Quadrangle brand. The company’s online matrimony and real estate
divisions operate under Jeevansathi.com and 99acres.com, respectively, and are currently in
investment mode. New launches include Firstnaukri.com (fresher recruitment site),
Brijj.com (professional networking site), asknaukri.com (career guidance website), and
shiksha.com (education information portal). IEL’s TTM revenue is INR3.5bn and, employee
strength of 2,180 people.
Investment theme
IEL is a long term play on the internet space in India. With lead in the online recruitment
market (through Naukri.com) and presence in the online classified space has the potential to
establish a market leading position and grab large pie of increasing online adoption. As
various businesses come out of the recent slowdown we see recruitment industry to grow
significantly as it is highly correlated to the economic health of the growth of domestic
corporate sector. We expect IEL’s earnings growth at 25% CAGR over FY11‐13E. However,
we see the valuations at P/E of 24.7x and EV/EBITDA of 14.9x FY13E as expensive.
Key Risks
Faster than anticipated scale up of non‐recruitment segments
Strong profitability from investee companies.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Info Edge (IEL) Q3FY12 revenues were marginally lower than expectations
while net profits were in line. Overall, revenues stood at INR920mn (up
22.5% YoY and flat QoQ) and net profits at INR289mn (up 31.6%YoY and
2.2% QoQ). Recruitment revenues (up 20% YoY) have continued to
decelerate, impacted by a slowing economy that took a toll on hiring
trends across industries. We note that while Q4 has historically been the
strongest quarter for IEL, due to the current slowdown in domestic
economy, growth deceleration is likely to continue. This has been amply
reflected in the deferred sales growth trend (up 34% YoY, down from
over 50% YoY growth two quarters back). While, we do not see a
meaningful downside in the stock from hereon, slowing growth will keep
the stock performance muted. We thus maintain our ‘REDUCE’ rating.
Hiring slowdown could impact pricing as well
Revenues from recruitment segment grew at 20% YoY, the lowest in the past seven
quarters. However, operating margins continued its upward trend, reaching 50.7%.
Deferred sales revenues stood flat QoQ at INR924mn, impacted by the slowdown in
domestic economy. Further, we believe IEL may have to offer higher sales discounts
that will impact pricing in the next one‐two quarters.
Real estate segment sustains growth momentum
Despite the slow deal momentum and high interest rates, online real estate segment
continued to see traction. This quarter also this segment grew 50% YoY as the company
has continued its investment in terms of products and sales. Total listings on the portal
have scaled to 320,000 (up 63% YoY). While globally, real estate is one of the largest
segments in the online classifieds space, in India, it still is at a nascent stage and
unlikely to provide much growth to IEL in near term.
Outlook and valuations: Moderating growth; maintain ‘REDUCE’
We do not see any meaningful downside to the stock from current levels. However, the
stock performance will remain muted due to the slowdown in the hiring activity. We
thus maintain our ‘REDUCE / Sector Underperformer’ rating. At CMP of INR592, the
stock is trading at P/E of 28.9x and 24.7x FY12 and FY13 earnings, respectively.
Company Description
IEL is amongst India’s leading online classified companies, with presence in online
recruitment, matrimony, real estate, and offline executive search. It pioneered the online
recruitment business under its flagship brand Naukri.com and operates offline recruitment
business under the Quadrangle brand. The company’s online matrimony and real estate
divisions operate under Jeevansathi.com and 99acres.com, respectively, and are currently in
investment mode. New launches include Firstnaukri.com (fresher recruitment site),
Brijj.com (professional networking site), asknaukri.com (career guidance website), and
shiksha.com (education information portal). IEL’s TTM revenue is INR3.5bn and, employee
strength of 2,180 people.
Investment theme
IEL is a long term play on the internet space in India. With lead in the online recruitment
market (through Naukri.com) and presence in the online classified space has the potential to
establish a market leading position and grab large pie of increasing online adoption. As
various businesses come out of the recent slowdown we see recruitment industry to grow
significantly as it is highly correlated to the economic health of the growth of domestic
corporate sector. We expect IEL’s earnings growth at 25% CAGR over FY11‐13E. However,
we see the valuations at P/E of 24.7x and EV/EBITDA of 14.9x FY13E as expensive.
Key Risks
Faster than anticipated scale up of non‐recruitment segments
Strong profitability from investee companies.
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