Q1FY24 Review: Info Edge (India): Billings stagnate on hiring-related headwinds

14 Aug 2023 , 12:26 PM

Info Edge (INFOE) reported revenue growth of 15% YoY (+3.6% QoQ) in Q1FY24, aided by a steady 15% YoY growth in Naukri, primarily due to momentum in hiring in non-IT sectors. Billings – a leading indicator of revenues – was broadly flat YoY, on continued challenging hiring environment in IT, despite reasonable growth momentum in non-IT. Growing revenues by 25% YoY, 99acres continued its momentum as the Real Estate market remained strong. Ebitda margin rose to 38.8% (+7ppt YoY), since marketing spends were optimised across segments. Management indicated that July has also been a soft month for them across IT and non-IT. Analysts of IIFL Capital Services cut FY24-26 EPS by up to 2% on lower revenues estimates in the near term. Their 12-month SOTP-based TP rises to Rs5,600 (from 5,500) on higher valuation for Zomato/PB Fintech. Despite nearterm challenges, INFOE remains an attractive long-term story; BUY. 

Billings decline on challenging IT hiring environment: 

Recruitment segment saw billings decline -4.2% YoY, as slowdown in IT hiring led to delayed renewals and tougher negotiations. Management indicated that the tough environment could continue in the near term; but they are seeing some green shoots like captive hiring. Non-IT hiring remained healthy in Q1, although July was soft. Revenues grew by 15% YoY. 99Acres witnessed a 25% YoY growth, led by continued strength in the Real Estate market. Jeevansathi continued to fall (revenues -15% YoY), although the pace of decline reduced. Shiksha remained healthy, growing 15% YoY. 

Margins steady sequentially: 

INFOE delivered Q1FY24 margins of 38.8%. Ad expenses decreased by 5.6ppt YoY, as it cut marketing spend in Jeevansaathi and 99Acres. Management stated that they expect ad spends to stay under check as they look for newer monetisation opportunities and expansion into smaller cities. At ~15% revenue growth, the current margins are sustainable, as per the management. 

Maintain BUY: 

Analysts of IIFL Capital Services 12-month TP of Rs5,600 values Naukri at 40x EV/Ebitda (unchanged), Zomato and Policybazaar at their 12-month TP and they ascribe 20% holdco discount to both. While macro challenges could hurt near-term growth, INFOE remains an attractive long-term story. Key risk: slowdown in jobs and aggressive acquisitions.