Info Edge (Q1 FY14)

India Infoline News Service | Mumbai |

Info Edge reported Q1 FY14 rupee revenue of Rs1.21bn (+14% yoy) was marginally below our expectation.

CMP Rs315, Target Rs355, Upside 12.7%
  • Info Edge reported Q1 FY14 rupee revenue of Rs1.21bn (+14% yoy) was marginally below our expectation. Recruitment business’ (75% of total revenues) growth was slower than expected at 8% yoy. On the other hand, the non-recruitment core business (99acres, Jeevansathi and shiksha) grew largely in line with expectation with revenues of Rs307mn (+36% yoy). 


  • The deferred sales revenue growth – an indicator of future performance was at 18% yoy. Though the growth appeared strong, as per the management, this does not indicate strong revival in recruitment business. The growth is attributable to two factors – 1) Strong collections in 99acres. 2) One-off lower collections in Q1FY13 resulting in an inflated (base effect) growth in Q1 FY14. This is indicated by strong 50% yoy collection growth in 99acres versus a weak 9% growth in Naukri business for H1 CY13. Management commentary too continued to be tepid on the recruitment business considering the cautious hiring in the current weak macro-economic environment. This is further validated by the sluggish 2% yoy growth in the Job Speak index which currently at 1230.


  • The OPM performance for the company was materially below expectation, correcting 3.3% qoq. Though the recruitment business margin was stable at 50.3% (versus 49.2% in Q4 FY13 and 50.1% in Q1 FY13), the profitability of the non-recruitment business was down (Rs90mn loss versus Rs49mn loss in Q1 FY13). This was mainly on the back of material increase in advertising expenditure (16.3% of revenues versus 13.4% in Q1 FY13) for the 99acres, Jeevansathi and Shiksha. The advertising expenditure for Shiksha (Rs37mn in Q1 FY14) is expected to normalize over FY14 but on the other hand promotional expenditure for 99 acres and Jeevansaathi is expected to be higher than expected. The company also wrote off its investment (Rs26mn done in 2011) in Floost.com due to continued weak performance. Overall due to lower than expected OPM and the investment write off the PAT came in 15% below estimate at Rs294mn.


  • Other than floost.com write off, the operational performance of rest of the investee companies was along expected lines. Their total revenues (except allcheckdeals.com) were up 65% yoy to Rs350mn. Their operating loss too narrowed by ~10% to 160mn. Majority owned investee cos - Zomato and Meritnation growth was even stronger with revenues expanding 150% yoy to Rs 80mn. Their losses narrowed down 25% yoy to Rs64mn. On a positive note, based on management expectation, the India operations of Zomato broke even in Q1 FY14.


  • Under-Performance of the recruitment business should continue in near term as indicated by the management. On the non-recruitment business, though the traction (especially in 99acres) was good, the heightened competitive intensity may lead to delay in achieving sustained profitability. On a positive note, we are enthused by the promising traction in the key investee companies and expect improved traction going ahead. We bake in higher than expected advertising expenses in our estimates and now expect 21%/11% (pre exceptional) Revenue/PAT CAGR over FY13-15E. We maintain BUY with marginally increased 9-month TP of Rs355. 

Result table
(Rs mn)
Q1 FY14
Q4 FY13
% qoq
Q1 FY13
% yoy
Net sales
1,208
1,171
3.2
1,060
13.9
Operating profit
369
397
(7.1)
369
(0.0)
OPM (%)
30.5
33.9
(338) bps
34.8
(426) bps
Depreciation
40
34
17.4
19
112.2
Interest
6
6
(12.4)
0
3,000.0
Other income
134
138
(2.8)
106
26.5
Exceptional item
(26)
(293)
-
-
-
PBT
432
202
113.7
456
(5.3)
Tax
137
138
(0.7)
138
(0.4)
Effective tax rate (%)
31.9
68.6
-
30.3
-
Reported PAT
294
63
363.6
318
(7.5)
EPS (Rs)
3
1
363.6
3
(7.5)
 Source: Company, India Infoline Research
 
Financial Summary
Y/e 31 Mar (Rs m)
FY12
FY13
FY14E
FY15E
Revenues (Rs m)
3,919
4,723
5,659
6,989
BSE 1,220.00 [8.85] ([0.72]%)
NSE 1,228.85 [7.75] ([0.63]%)

***Note: This is a NSE Chart

 

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