Buy Infoedge; target of Rs 5275: HDFC Securities

HDFC Securities' research report on Infoedge

Infoedge reported a modest quarter, with 3.6% QoQ revenue growth and lower advertisement spending. The core recruitment segment billing growth (-4% YoY) was weak due to the continued slowdown in IT hiring (~35% of Naukri revenue) and delay in renewals offset by traction in non-IT sectors like BFSI, travel, auto, construction, etc. Recruitment billings have witnessed two strong years of >30% YoY growth, which is slowing down in FY24E due to the base effect and lower hiring activity. The margin for the recruitment segment continues to be ~60%, which is impressive. 99acres and Jeevansathi continue to witness growth with a focus on improving profitability. The combined loss of 99acres and Jeevansathi stood at INR 0.42bn, which is down 32% YoY due to lower ad spending. We expect growth to be led by Naukri, 99 acres and Shiksha. The recruitment margin will be in the range of 58-60% and continued focus on spend efficiency will drive margins.

Outlook

We maintain our BUY rating with a SoTPbased TP of INR 5,275, valuing Naukri at 38x EV/EBITDA, 99acres/Jeevansathi+Shiksha at 5/3x P/S, while Zomato and Policybazaar have been assigned the market value (~15% discount). The core recruitment business is trading at 29x FY25E EV/EBITDA.