InfoEdge reported a mixed set of Q3FY20 numbers, as per the results update report by ICICI Securities. While revenues were below the estimates of the broking firm, cost optimisation and improvement in Naukri EBITDA led margin to come in above the estimate.
ICICI Securities said that revenues grew 14% YoY to Rs. 320.5 crore (below ISec estimate of Rs. 329.5 crore). Recruitment solutions grew 13.1% YoY to Rs. 230.3 crore, 99 acres grew 15.3% YoY to Rs. 58.2 crore and other verticals grew 19% YoY to Rs. 32.1 crore. EBITDA margins expanded ~170 bps QoQ to 33% (above ISec estimate of 32.4%) mainly due to strict cost controls. Although the current stock price limits the valuation upside, ICICI Securities likes the company’s business model considering it is a quasi-play on India’s booming startup economy and prudent capital allocation.
Valuation & Outlook
Having a niche in key businesses along with two unicorns in the growing space (Zomato, PolicyBazaar) and leadership in Naukri with EBITDA margin of 58% bode well for the company, says the report. However, the broking firm believes that in the near term, growth momentum is expected to slow down in two major segments of Naukri, 99 acres. Further, run up in stock price in last six months leaves no room for upside in valuation. Hence, ICICI Securities has maintained HOLD rating on the stock and values the stock on an SOTP basis to arrive at a target price of Rs. 3000. (Share Manthan, February 13, 2020)