India Internet :4QFY15F preview: Nomura Research

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99acres impacts operating performance - Info Edge :: Centrum

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Info Edge: Momentum slackens, growth drivers intact; upgrade to BUY :: Kotak Securities

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Momentum slackens, growth drivers intact; upgrade to BUY. 3QFY15 reflects (1) a
sharp easing of growth in 99acres (soft demand, undercutting by cash-rich competition)
and (2) weakening business metrics in recruitment (moderating activity from job seekers
and companies). This weakness can continue, especially in real estate (where most of
revenue is traffic dependent). Growth drivers are intact for both sectors—for
recruitment these would be cyclical recovery, pricing uptick and new products, and for
real estate they would be concentrated in the top-four cities, mainly from developers.
Our revised SOTP target price of `960 (from `1,070) bakes in stricter assumptions for
99acres and Zomato. We upgrade to BUY from ADD after the recent price correction

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Just about there… • InfoEdge :: ICICI Securities

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

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

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Buy Info Edge; Target : | 950 :: ICICI Securities, with PDF link

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Building warchest for future...
Info Edge has raised | 750 crore through placement of securities last
week 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 apps (>30% of traffic generated is from mobile) as well as 6)
acquisitions.
Re-rating likely to continue on improving growth outlook; maintain BUY
Info Edge reported a healthy Q1 led by improvement in flagship Naukri
business and continued momentum in other verticals (99acres, Shiksha).
The management indicated demand uptick in Naukri may continue in
FY15E while other verticals (99acres, Shiksha) could aid overall company
growth. We are raising our estimates and expect revenue, PAT CAGR of
25%, 44%, respectively, in FY14-16E. We raise our DCF based target price
to | 950, which discounts our FY16E EPS estimate of | 15.5 by 54x.


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Macro continues to dampen recruitment business - Info Edge:: Centrum

Macro continues to dampen recruitment business
We maintain Hold rating on Info Edge due to the challenging macro environment
impacting recruitment business as seen in Q3FY14 results where revenue growth
was 10.8% (collection growth 9-10%). Despite 99acres posting marginal operating
profit in the quarter, we believe the company will continue to invest in the vertical
to maintain market share in the highly competitive category. With 66% rally in the
stock price in the past 3 months on the back of expectations of quick recovery in
the recruitment business, investment in Zomato and strong profitable growth in
99acres, we believe there is no room for earnings upside and hence maintain Hold
rating on the stock
Q3FY14 results in-line with expectations: Revenue growth of 15.9% for the
company was in-line with expectations at Rs1234mn (estimate of Rs1234mn) on the
back of 10.8% YoY growth in recruitment business and 33.5% YoY growth in the nonrecruitment businesses. Operating profit was up 18.6% YoY on the back of 76bps
expansion in operating margins as admin & other expenses grew by mere 9% YoY.
Lower other income (down 12.8% YoY) coupled with higher tax rate (31.8% vs 29.6%)
resulted in PAT growing by mere 4.6% (4.2% below expectations).
Recruitment business posts double digit growth: Recruitment business posted
10.8% YoY revenue growth (~9-10% collection growth) on the back of healthy
growth in IT sector during the quarter and gain in market share from competitors.
Recruitment margin was up by 208bps on the back of lower ad spends in the
quarter. The company also launched an android app and a career site manager in
the period. Management expects future growth to depend on GDP growth rate.
99acres posts marginal profits: Though non-recruitment business posted an
operating loss of Rs32mn, 99acres posted operating profit of Rs4mn on the back of
39% YoY revenue growth coupled with lower A&P spends. Management expects to
invest in this business on new product development (android app, map search and
listing verification service), expanding in cities and brand building. Revenue growth
in jeevansaathi was mere 13% YoY with losses at Rs17mn. We believe losses in nonrecruitment businesses will continue in FY15
Valuation & Risks: We have marginally lowered our sales and operating profit on the
back of lower traction in recruitment business. We maintain Hold rating with a revised
target price of Rs525 on our SoTP valuations given the uncertainty in the recruitment
business on the back of sub 5% GDP growth rate, continued losses in nonrecruitment vertical and 66% increase in stock price in the past 3 months. Key upsides
could be faster than expected recovery in recruitment business and turnaround in
non-recruitment businesses

Info Edge:: Centrum

Low A&P spends boost margins
We maintain Hold rating on Info Edge given the uncertainty in the recruitment
business, continued losses in non-recruitment vertical and expectations of further
investment in Zomato. Q2FY14 results were above expectations on the back of
strong 44.8% growth in non-recruitment vertical and A&P mere 11.2% of sales (2nd
lowest in 30 quarters) helped the company post 19.3% YoY (13.5% above
expectations) increase in operating profit with PAT being flat on the back of lower
other income and high taxes. We believe the growth in the recruitment vertical was
due to an increase in market share and healthy demand from IT services vertical
even though the environment continues to remain challenging.

Sizzling Stocks - Info Edge India, United Breweries :: Business Line

Info Edge India :Mixed quarter with healthy revenue growth but lower margins; structural growth story remains intact; reiterate OW :: JPMorgan

 Info Edge reported a mixed quarter (1QFY14) with relatively healthy
revenue growth of 3.2% Q/Q (after delivering 10% Q/Q growth last
quarter), but meaningful contraction in gross/EBIT margins. Recruitment
services, the largest business of the company, grew 1.8% Q/Q and 7.6% Y/Y.
Naukri.com collections grew 9% Y/Y in the first half of CY13 despite weak
macro environment. However, management suggests that there is no sign of
improvement in hiring activity yet and growth might remain subdued in coming
quarters due to challenged macro environment. Notably, Recruitment Services’
revenue growth is highly correlated to domestic GDP growth and corporate
confidence in the country. Due to Info Edge’s leadership position in this
business, we believe the company is well positioned to benefit
disproportionately as and when GDP growth picks-up. The other smaller
businesses/verticals saw solid growth of 7.6% Q/Q. 99acres had a relatively
muted quarter with flat Q/Q revenues (though up 47% on Y/Y basis).
 We maintain our view that Info Edge is best placed to benefit from the
increasing internet penetration and demographic profile of the country due
to its leadership position in two major verticals – recruitment services and real
estate. However, we believe it is a relatively long-term play, and the macro
environment could cause disappointments in the short term.
 Info Edge reported EBIT margin contraction of 380 bps Q/Q (from 31.0%
in 4QFY13 to 27.2% in 1QFY14) primarily due to a decrease in gross
margins & increase in advertisement expenses. Gross margins contracted 260
bps Q/Q due to increase in salary costs. Management reiterated that margins are
likely to remain under pressure if revenue growth remains below 20% Y/Y.
Notably, advertising expenses increased meaningfully from 14.1% of revenues
in 4QFY13 to 16.3% of revenues as the company advertised for 99acres,
Jeevansathi.com & Shiksha. The advertisement investments point to longer-term
growth/market-share focus of Info Edge, which is encouraging in our view.
 99acres (Info Edge’s online real estate classifieds) reported flat revenue
Q/Q in 1QFY14 (after 48% Y/Y growth in FY13). However, we remain
confident about the long-term growth potential of this business given Info
Edge’s leadership position in this under-penetrated market. Management plans
to continue investing in advertising/brand and product development to maintain
leadership in this business.
 Investment view: Retain OW with our Mar-14 PT of INR 360. Recruitment
Services accounts for most of the value, and 99acres the remainder.

Worst is yet to come Info Edge:: Centrum

Worst is yet to come
Info Edge posted Q4FY13 results below our expectations with revenue growth of 9.9%YoY with mere 4.4%YoY growth in recruitment business, 621bps fall in EBIDTA margin and 11.5%YoY de-growth in Adj. net profit. The company has also written-off Rs293mn investment in 99labels.com in the quarter. We expect challenges ahead for its core recruitment businesses and hence maintain Neutral view on the stock.

Results below expectations: Info Edge posted Q4FY13 results below expectations with topline at Rs1171mn (v/s est of Rs1182mn), up 9.9%YoY on the back of mere 4.4%YoY growth in the recruitment vertical while new businesses grew by 35% YoY. Operating profit was down by 7.1%YoY on the back of 621bps drop in margins as the company had 44.7%YoY increase in admin and other expenses and 15.7% increase in A&P and employee cost. During the quarter, the company wrote off Rs293mn investment in 99labels.com impacting profitability. Adjusting for it, PAT was at Rs356mn (v/s est. of Rs388mn), down 11.5%YoY.

Recruitment business continues to be under pressure: During the quarter recruitment business growth was mere 4.4% as the company serviced 26K unique customers against 25K in Q4FY12. Also for FY13, the company added mere 2K unique customers while pricing was flat in the past 15 months as the company could not hike prices due to the economic slowdown. Margins for the recruitment business during the quarter were at 49.1% (down 580bps YoY) on the back of low revenue traction. Though collection growth for the quarter was 3.8% YoY, for Naukri corporate sales continued to remain flat. The management continued to maintain caution and did not expect the business to improve over the next two quarters unless economic sentiments improved drastically.

Info Edge - Macro uncertainty to impact growth; visit note; Reduce :Edelweiss PDF link

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.

Info Edge (India) Ltd. India Summit: Management Meeting Takeaways: Morgan Stanley Research

Info Edge (India) Ltd.
India Summit: Management
Meeting Takeaways
Quick Comment: Management indicated that its
internal targets would be lower than actual performance
last year and it needs to wait and watch 1Q trends to get
better picture of fiscal 2013 revenue outlook.

Info Edge - Buy :Business Line

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The recruitment scenario through the online mode, has remained reasonably good despite apprehensions of a slowdown in the economy.

Sectors such as IT have not cut down on their projections of intake in manpower. Info Edge offers a good opportunity for investors with a two-year horizon. It offers a play on the increasing popularity of online portals that offer free and paid services for a variety of activities such as job search, marriage and home finding.

Continuous improvements in resume registrations in naukri.com and ever expanding non-recruitment business through portals such asjeevansathi.com and 99 acres.com are key positives for the company.

At Rs 711, the share trades at 24 times its likely per share earnings for FY13. This is lower than the levels it has traded at historically. Besides, its financial growth rate and lack of listed Indian peer, justify its relatively higher valuations compared to the broader markets.

In FY12, Info Edge's revenues increased by 29.3 per cent over the previous fiscal to Rs 416.5 crore, while net profits improved by 46 per cent to Rs 122.6 crore.

That it has managed these figures in a slowing economy suggests that the company's business-mix helps it stay resilient.

RECRUITMENT BUSINESS STRONG

Info Edge's recruitment portal naukri.com has had a good run over the past few years; it did reasonably well even in the slowing economy last year. The total recruitment business accounts for over 80 per cent of the company's revenues.

In FY-12 alone, the number of resumes on the portal rose to 29 million, up 4 million from a year earlier. What is even more desirable is the fact that the number of resumes modified daily has increased from 72,000 to 91,000. This suggests continuous interest from existing pool of customers. Data from agencies such as Comscore, suggests that naukri is ahead of portals such as timesjobs and monsterindia with a traffic share of 60 per cent.

The IT (25 per cent of revenues), infrastructure (21 percent) and BFSI (5 per cent) sectors form the bulk of recruiters on the portal. Large software companies such as TCS and Cognizant have not announced any cut in their intakes for the year, which means that the perceived slowdown may be very company-specific in this sector.

In the infrastructure sector too, large companies such as L&T and BHEL are still in the hiring mode. The segment also witnesses high attrition, which is a good thing for job portals. Banks, especially public sector ones, are likely to continue hiring, given their talent crunch and exit or retirement in middle- and senior managements.

Notably, advertising for vacancies is rapidly vanishing from the print space in favour of online recruitment, with even public sector companies calling for positions though online ads and registrations. In this regard portals such as naukri would be beneficiaries.

OTHER SEGMENTS STEP UP

Apart from its recruitment business, Info Edge has witnessed increasing contribution from its other key segments such as marriage portal (jeevansathi.com) and its real-state focused Web site (99acres.com). From accounting for next to nothing a few years back, these segments now contribute to 20 per cent of revenues and have been growing at a faster clip than the overall company rate.

Jeevansathi.com has seen continuous increase in the number of profiles created. Marriage being a non-cyclical event is less susceptible to macro-economic shocks. In fact, the average amount realised per customer has risen 14.6 per cent in 2011-12 to Rs 3120.

In 99acres.com too, the number of paid transactions has increased rapidly. The company has recently launched meritnation.com, a Web site that caters exclusively to school-going children. It offers study material, NCERT solutions, and interactive learning solutions. While the business is at a nascent stage, it holds value given, Info Edge's ability to monetise its Web offerings.

RISKS

The marriage and real-estate portal are loss-making, face heavy competition and are not the top players in those segments, unlike the recruitment portal. Any increase in advertising spends for greater brand visibility or cutting of prices to take on competition can hurt margins.

Buy Info Edge; Target :Rs 730 ::ICICI Securities

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I n   l i n e   q u a r t e r . …
Info Edge reported its Q3FY12 results, which were in line with our
expectations. The topline for the company stood at | 92 crore against our
expectation of | 92.4 crore, growing 0.1% QoQ and 22.5% YoY. The
EBITDA for the quarter stood at | 34.9 crore against our estimate of | 32.4
crore, posting growth of 5.5% QoQ and 27% YoY. The EBITDA margin
improved 134 bps YoY and 195 bps QoQ primarily led by operating
leverage. The company reported PAT of | 28.9 crore growing 31.6% YoY
and 2.2% QoQ.

Highlights of the quarter
The recruitment business grew 20.3% YoY while other businesses posted
revenue growth of 32.8% YoY. The  management has indicated that it
would continue to invest in the business even in the current macro
environment. Overall EBITDA losses in other businesses were lower this
quarter at | 2.9 crore against | 4.1  crore in Q2FY12 and | 2.7 crore in
Q3FY11. Jeevansathi, Naukri and Shiksha posted YoY revenue growth of
14%, 23% and 52%, respectively.

V a l u a t i o n
The company reported yet another strong quarter with robust growth in
recruitment revenues. The management indicated that the long term
environment looks positive and it would continue to invest in promotional
activities and brand building exercise in other verticals even amid the
slowing economy. At the CMP of | 593, the stock is trading at 32.8x
FY12E EPS of | 21.5 and 24.4x FY13E EPS of | 28.8. We have valued the
stock using DCF methodology at | 730 (| 750 earlier). Our target price
discounts FY13E EPS by 25.3x and implies an upside of 23%. We
maintain our BUY rating

INFO EDGE Slowing economy impacts growth:: Edelweiss

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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.

Info Edge -Another nice quarter ticks over with meaningful operating leverage of recruitment business kicking in :JPMorgan

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 Info Edge reported a decent 2Q FY12 with 5.1% Q/Q revenue growth and
gross margin expansion of 210bp. Recruitment services, the most important
segment of the company which contributes almost all of Info Edge’s value,
reported revenue growth of ~27% Y/Y (6.7% Q/Q). An important highlight of
the quarter was a meaningful increase in advertising revenues, which increased
to 16% of revenues from about 13% last quarter. It highlights management’s
focus on expansion/retention of market share in the long term, as opposed to
maximizing profitability in the short term, which we view as a positive.
 Recruitment services business should comfortably achieve 25%+ revenue
growth in FY12E despite concerns about softening business environment as
Naukri.com retains its relatively uncontested leadership. The commentary
from major IT companies (IT sector contributes 25% of Naukri.com revenues)
suggests that the demand environment is still robust despite macro concerns.
However, management pointed to moderation in collection growth, which needs
to be watched, but we believe it is too early to raise the alarm.
 99acres' (the online real estate classified of Info Edge) sequential revenue
growth remained muted (though positive) in 2QFY12. We acknowledge that the
business might face difficulties in the short-term due to high interest rates and
the High Court ruling regarding land acquisition (primarily in Noida and Delhi
region). But we remain confident about the long-term growth potential of
this business given 99acres.com’s leadership position, and underlying
demographics in India. Besides, Info Edge has also the resources to invest in
making 99acres as the real estate portal of choice in India.
 We reassert that the online portal business has high operating leverage and
strong revenue growth should drive margin expansion. Naukri.com's ~54%
EBITDA margin in 2QFY12 is a testiment to that, and we believe 99acres.com
has the potential to gain meaningful scale which, supported by operating
leverage, could drive a meaningful EBITDA contribution.
 Revenue visibility for FY12 continues to be high, an indicator of which is
deferred sales revenues of Rs918MM. These will be recognized over the next
3-4 quarters making up about 25% of estimated revenues for the next 4 quarters.
 We maintain our OW with a new price target of Rs820. Recruitment services
business makes up most of the value, while 99acres contributes the remainder.
We do not provide any value for the other businesses/portals in our price target

Info Edge India – Collections slow down :: RBS

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Info Edge reported in-line 2Q12 revenues and operating profit. However, a dip in deferred sales
implies collections slowed down to 19% yoy vs 25% in 1Q12. A strong 26% ytd outperformance
to the BSE IT Index despite deteriorating macros does not leave room for disappointment in our
view.

Buy Info Edge; Target :Rs 785 ::ICICI Securities,

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G r o w t h   i n   l i n e . …
Info Edge reported its Q2FY12 results, which were in line with our
expectations. The topline for the company stood at | 91.9 crore against
our expectation of | 92.4 crore, growing 6.1% QoQ and 29.1% YoY. The
EBITDA for the quarter stood at | 33.1 crore against our estimate of | 32.4
crore, posting a growth of 4.6% QoQ and 54.8% YoY. The EBITDA margin
improved 546 bps YoY primarily due to robust revenue growth backed by
high operating leverage but declined 51 bps QoQ to 36.0%. The company
reported PAT of | 28.2 crore, growing 57.9% YoY and 10.3% QoQ.

Highlights of the quarter
The recruitment business grew 26.6% YoY while other businesses posted
a handsome revenue growth of 33.6% YoY. The management has
indicated that it would continue to invest in the business even in the
current macro environment. Overall  EBITDA losses in other businesses
were higher at | 4.1 crore against | 2.7 crore in Q1FY12 and | 5.9 crore in
Q2FY11. Jeevansathi, Naukri and Shiksha posted YoY revenue growth of
15%, 32% and 78%, respectively.

V a l u a t i o n
The company reported yet another strong quarter with robust growth in
recruitment revenues. The management has indicated that the long-term
environment looks positive and it would continue to invest in promotional
activities and brand building exercise in other verticals even amid the
slowing economy. At the CMP of | 704, the stock is trading at 33.4x
FY12E EPS of | 21.1 and 24.7x FY13E EPS of | 28.5. We have valued the
stock using DCF methodology at | 785. Our target price discounts FY13E
EPS by 27.6x and implies an upside of 11.6%. We maintain our  BUY
rating on the stock.