Q2FY24 Review: Info Edge (India): Billings inch higher despite weak IT

8 Nov 2023 , 10:06 AM

Info Edge (INFOE) reported steady revenue growth of 12% YoY (+1.5% QoQ) in Q2, as muted IT hiring was offset by continued momentum in non-IT hiring and 99Acres. Billings – a leading indicator of revenues – increased 5% YoY (vs flat in Q1), despite continued weakness in IT hiring. 99acres continued its momentum, growing revenues by 25% YoY, as real estate market remained strong. Ebitda margin rose to 40.7% (+6ppt YoY), on the disciplined approach on ad spends across segments. Management indicated that they are not yet seeing signs of any material recovery in IT hiring, however non-IT hiring continues to remain strong. Analysts of IIFL Capital Services increase FY24-26 EPS by 1%-5%, as lower near-term revenue forecasts are offset by higher margins. Their 12-mth SOTP-based TP rises to Rs5,680 (from 5,600) on higher valuation for Zomato/PB Fintech. INFOE remains an attractive long-term story, despite nearterm challenges and analysts of IIFL Capital Services maintain BUY. 

Billings inflect higher, despite challenging IT hiring environment: 

Recruitment segment saw billings grow 1.4% YoY (vs -4.2% in Q1), as continued weakness in IT hiring was offset by double digit growth in nonIT billing. Management indicated that analysts of IIFL Capital Services are in the third quarter of IT hiring slowdown currently, which has historically lasted for a maximum of four quarters. 99Acres witnessed a 25% YoY growth, led by continued strength in the Real Estate market. Jeevansathi rebounded to grow at 9% YoY (after seven quarters of decline) as newer products started contributing to revenues. Shiksha remained healthy, growing 16% YoY.

Margins improve on disciplined ad spends: 

INFOE delivered Q2 margins of 40.7%. Ad expenses declined by 4ppt YoY, as it cut marketing spend across segments. Management stated that they expect the Ad spends to remain under check as they look for newer monetization opportunities and expansion into smaller cities. Current margins are sustainable at ~15% revenue growth, per the management. 

Maintain BUY: 

Analysts of IIFL Securites 12-month TP of Rs5,680 values Naukri at 40x EV/Ebitda (unchanged), Zomato and Policybazaar at their 12-mth 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.