Buy Infoedge; target of Rs 4600: HDFC Securities

HDFC Securities' research report on Infoedge

Infoedge posted a good quarter with revenue growth of 4.4% QoQ and a better margin in the core segment. Recruitment (~80% of revenue and billings) continues to exhibit strong performance (+4.5% QoQ) and margins expanded 214bps QoQ to 62.9%. The billings growth (+18% YoY) has slightly moderated due to a slowdown in IT hiring (~36% of Naukri) but hiring in non-IT sectors like BFSI, infra, travel etc. is gaining traction. Naukri is an undisputed leader with ~80% traffic share, enjoys long-term contracts with pricing power and generates ~67% of revenue from platform access leading to higher margins. 99acres and Shiksha clocked +25/26% YoY growth and will continue to attract investments. Jeevansathi has slowed down due to a strategy reset, leading to a revenue decline of 26% YoY. We expect growth to be led by Naukri, 99 acres and Shiksha. The margin for recruitment will be in the range of 60-61%.

Outlook

We maintain our BUY rating with a SoTP-based TP of INR 4,600, valuing Naukri at 40x EV/EBITDA, 99acres/Jeevansathi/Shiksha at 5/3/3x P/S, while Zomato and Policybazaar have been assigned the market value (~15% discount). The core recruitment business trades at 30x FY24E EV/EBITDA.

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