Neutral on Info Edge\, target price Rs 2\,550: Motilal Oswal

Motilal Oswal has given a neutral rating to Info Edge (India) with a target price of Rs 2,550. The share price moved down by -8.21 per cent from its previous close of Rs 2954.70. The stock’’s last traded price is Rs 2712.05.

The brokerage says the Impact of the Covid-19-led lockdown dragged the fourth quarter FY20 financial performance for Info Edge. While the last quarter of the financial year is seasonally strong, the company saw billings decline for Naukri (recruitment) and 99acres (real estate). The Info Edge board has approved a QIP of Rs 18.75 billion, which would be utilized for additional investments in the standalone entity, and strategic acquisition to complement one or more of the standalone businesses.

The brokerage says that given the company’s market positioning, multi-dimensional growth can be expected across its core businesses in the medium to long term. The brokerage expects consolidated losses to be contained over a time period.

Investment Rationale

The brokerage says it expects a halt in near-term momentum, led by the expectation of a billing decline in the reacruitment/real estate segments for the first half of FY21. However, given the market positioning of its entities, multi-dimensional growth could be expected in the medium to long term, backed by recruitment, real estate, Zomato (its biggest investee company) and PolicyBazaar. The company has so far shown prudence with its investments. Therefore, the brokerage believes that some of its current investments would scale up in the medium to long term and further contribute to the group’s valuations. It maintains a neutral rating and has arrived at a target price of Rs 2,550 using SOTP approach.

Source: Motilal Oswal

Financials

For the quarter ended December 31, 2019, the company reported consolidated sales of Rs 335.06 crore, up 1.67 per cent from last quarter sales of Rs 329.54 crore and up 15.52 per cent from last year's same quarter sales of Rs 290.04 crore. The company reported net profit after tax of Rs 85.39 crore in the latest quarter.

Promoter/FII Holdings

Promoters held 40.48 per cent stake in the company as of March 31, 2020, while FIIs held 35.45 per cent, DIIs 13.38 per cent and public and other 10.69 per cent.