Q3FY24 Review: Info Edge (India): Moderate growth in billings as IT remains soft

14 Feb 2024 , 02:46 PM

Info Edge (INFOE) reported moderate revenue growth of 7% YoY (+0.4% QoQ) in Q3, as continued muted IT hiring was partly offset by continued momentum in non-IT hiring and non-recruitment businesses. Billings – a leading indicator of revenues – increased 5% YoY, as IT hiring remained weak. 99acres continued its momentum, growing revenues by 22% YoY, as macro continued to support the real estate market. Ebitda margin came in at 40.4% (+130bps YoY), on reducing losses in non-recruitment businesses. Management indicated near-term outlook for IT hiring remains uncertain, however non-IT hiring continues to remain strong. Analysts of IIFL Capital Services reduce FY24-26 EPS by 1%-3%, on lower near-term revenue forecasts. Their 12-month SOTP-based target price rises to Rs6,500 (from 6,170), implying 22% upside, on higher valuation for Zomato/PB Fintech. INFOE remains an attractive long-term story, despite near-term challenges and we maintain BUY. 

Muted billings on continued weakness in IT hiring: 

Recruitment segment saw billings decline 1.3% YoY (vs +1.4% in Q2), as continued weakness in IT hiring was partly offset by continued momentum in non-IT billing. Management indicated that utilization rates for IT companies have started increasing which should lead to pick up in IT hiring, although nearterm outlook remains uncertain. 99Acres witnessed a 22% YoY growth, led by continued strength in the Real Estate market. Jeevansathi growth accelerated to 23% YoY on continued efforts to improve monetization. Shiksha was also strong, growing 23% YoY and turned PBT positive. 

Margins improve on reduced losses at non-recruitment businesses: 

INFOE delivered Q3 margins of 40.4% (+130bps YoY). Ad expenses declined by 2ppt YoY, as it cut marketing spend across segments. Mgmt 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 mgmt. 

Maintain BUY: 

Analysts of IIFL Capital Services 12-month TP increases to Rs6,500 (from Rs6,170) 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 longterm story. Key risk: slowdown in jobs and aggressive acquisitions.