ICICI Direct recommended hold rating on Info Edge (India) with a target price of Rs 2630 in its research report dated November 13, 2019.
ICICI Direct's research report on Info Edge (India)
InfoEdge reported a mixed set of Q2FY20 numbers. While revenues were above our estimates, EBITDA margins were below our estimate. Revenues grew 19.5% YoY to Rs 316.6 crore led by recruitment solutions (grew 18.7% YoY to Rs 226.4 crore) and 99acres (grew 26.2% YoY to Rs 57.0crore). EBITDA margins declined ~92 bps QoQ to 31.4% mainly due to an increase in employee benefit expenses and administrative expenses. 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.
Revenue momentum in key businesses along with two unicorns in the growing space (Zomato & PolicyBazaar) bode well for the company. Coupled with margin expansion would lead to strong growth in profitability. However, the recent run up in stock price leaves limited upside in valuation. Hence, we maintain our HOLD recommendation on the stock and value the stock on an SOTP basis to arrive at a target price of Rs 2630/share.
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