Hold Info Edge (India); target of Rs 3290: ICICI Direct

ICICI Direct's research report on Info Edge (India)

InfoEdge’s Q4FY20 numbers were below our estimates on all fronts. Revenues grew 10.3% YoY to Rs 322.8 crore (below our estimate of Rs 324.1 crore). Recruitment solutions grew 11.2% YoY to Rs 230.6 crore (vs. our estimate of 11% YoY growth and Rs 230.2 crore), 99 acres grew 3.6% YoY to Rs 56.4 crore (vs. our estimate of Rs 58.8 crore) and other verticals grew 16.2% YoY to Rs 35.9 crore (vs. our estimate of Rs 35.2 crore). EBITDA margins declined ~315 bps QoQ to 29.9% (below our estimate of 30.8%) mainly due to a decline in Recruitment margins (down 155 bps QoQ to 54.2%). The company is planning to raise Rs 1875 crore via the QIP route and issue of equities. Although the current stock price limits the valuation upside, we like the company’s business model considering it is a quasi-play on India’s booming startup economy and prudent capital allocation.

Outlook

However, in the near term, growth momentum is expected to slow down in two major segments of Naukri, 99 acres. Further, a run up in stock price leaves no room for upside in valuation. Hence, we maintain our HOLD rating on the stock and value the stock on an SOTP basis target price of Rs 3290.

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