Shares of Info Edge (India) gained 2 percent to Rs 4,415 per share on November 8 after the company delivered strong Q2 FY24 financial results. Brokerages remain optimistic of Info Edge’s long-term opportunity in its operating entities, but warn recruitment segment to be adversely impacted due to soft IT demand.
Analysts at Motilal Oswal shared a ‘neutral’ rating on Info Edge stock with a target price of Rs 4,390 per share, underlining the fact that a slowdown in IT hiring activity would remain a key concern for the Naukri.com business, given its significantly high revenue contribution. “While we expect a recovery in IT hiring in FY25, we believe Naukri’s billings would decline in FY24E on a high base, which will result in a single-digit growth for FY24 and FY25,” they wrote in a post result review analysis.
However, given the company’s strong September quarter performance, brokerage firms such as Bernstein and Nomura remain bullish on the counter.
Bernstein, for instance, shared an ‘outperform’ call for Info Edge, with a target price of Rs 4,800 per share. Highlighting the rationale behind their rating, they opined that the company delivered steady revenue growth of 12 percent on-year in Q2 as it clocked strong revenues from 99Acres.com (up 25 percent year-on-year).
The financials
Nomura shared a ‘buy’ call for the stock, with a target price of Rs 5,210 per share, implying a 20% upside. The non-recruitment business continued to scale-up well, Nomura said. Analysts have revised earnings per share (EPS) estimates for Info Edge by a percent over FY24-26E.
Info Edge posted a two-fold jump in consolidated net profit to Rs 240 crore for the September quarter, whereas consolidated revenue from operations of the company grew by a modest 3.6 percent on-year due to soft recruitment business.
The real estate vertical of Info Edge, 99acres.com, continued its growth trend from the past few quarters, delivering a strong revenue growth of 25.2 per cent in the September-ended quarter.
Meanwhile, revenues in the recruitment business grew 9.1 per cent year-on-year during the quarter.
ALSO READ: No signs of recovery in IT hiring, big GCCs also impacted by slowdown: Info Edge CEO
Margins likely to peak out
Info Edge has surprised over the last two quarters with a sharp margin improvement and lower dependency on advertisement and operating leverage.
However, analysts at Motilal Oswal see limited upside on margins from hereon given slower growth pegged in FY24 and FY25.
“We expect an FY24/FY25 earnings before interest, tax, depreciation, and amortisation (Ebitda) margin of 39.2 percent/37.9 percent,” they added.
The company’s Ebitda margin stood at 40.7 percent in Q2FY24, up by 610 basis points (bps) from 34.6 percent in the corresponding quarter of last year.
That apart, the company declared an interim dividend of Rs 10 per share for fiscal year 2023-24. The record date to determine eligible recipients of interim dividend is fixed on November 17, 2023.
So far in 2023, Info Edge's stock has surged 10 percent as against 6 percent rise in the benchmark Sensex.
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