Strong growth prospects, mixed valuations seen for Info Edge stock

Info Edge (India), the country’s leading consumer internet company known for its platforms in recruitment (naukri.com), real estate (99acres.com), matrimony (jeevansathi.com) and education (shiksha.com) space, delivered revenue growth in line with expectations in the April-June quarter (Q1) of FY25.

Standalone revenue rose 9.3 per cent year-on-year (YoY) and was up 5 per cent quarter-on-quarter (Q-o-Q) to Rs 630 crore, while the Ebitda margin came in at 39 per cent (down 160bp Q-o-Q but up 25bp Y-o-Y). The latter was a disappointment. Billings were up 10.8 per cent Y-o-Y to Rs 570 crore. The adjusted profit after tax or PAT was up 16.2 per cent Y-o-Y to Rs 230 crore, in-line with consensus. This is the best performance in five quarters and it could indicate that employment demand is rising.

A continued slowdown in IT hiring remains a risk. IT billings growth slowed to single digits, while non-IT segments grew 14 per cent Y-o-Y and this supported growth. Real estate portal, 99acres, experienced muted revenue growth in Q1FY25. New project sales moderated in Q1. Overall, new project sales in the top 8 cities were flat sequentially in Q1 and up approximately 10 per cent Y-o-Y. A planned increase in marketing spend may increase 99acres' losses. The real estate market is shifting towards channel partners as their share in houses sold has grown. The company does not intend to monetise buyers. In the new home segment, 99acres is now competing with Google and Facebook.

The margin decline was due to higher advertisement spend (13.4 per cent of revenue vs. 11.4 per cent in Q4FY24). The PAT was driven by lower depreciation and higher other income. Non-IT billings were strong due to demand in Healthcare & Life Sciences, Infrastructure, Transport & Real Estate, and Media, Entertainment & Telecom. A recovery in IT recruitment demand is still very desirable given the high exposure for Naukri. Near-term recruitment growth is likely to remain under pressure as IT services companies rely on their current bench. July JobSpeak data on IT hiring is encouraging, implying 12 per cent growth. Most large global capability centres (GCCs) have frozen hiring due to US uncertainty, but they have slowly resumed hiring and there could be a rebound once the US elections are completed.

The Info Edge management targets offices in over 100 cities (currently in 70 cities). A “Product-market fit” has been achieved for "JobHai" (focused on blue-collar jobs) which is a long-term play, with traction. The company continues to invest in platforms like JobHai, AmbitionBox, iimjobs, and Naukri Gulf.

The JeevanSathi.com matrimonial platform is nearing breakeven, driven by strong billing growth in Q1FY25 and sustained cost-control. Operating expenditure has reduced by 25 per cent Y-o-Y and marketing costs are down 45 per cent Y-o-Y. Key metrics like acceptance and two-way chats on the platform continue to remain healthy. The company is targeting breakeven in the matrimony segment in FY25. The Shiksha platform could expand its footprint given the emergence of new private universities. It should also breakeven or achieve profitability by the end of FY25. Taken together, JeevanSathi and Shiksha saw 29 per cent billings growth with the former up 35 per cent contributing more.

Analysts' perspective on valuations is mixed, though most concur on the growth prospects. The stakes held in companies like Zomato and Policybazaar would be subject to some sort of holding company discount which is part of the reason for disagreement. Valuations range from around Rs 6,500-7,600 with the stock price around Rs 7,175.