Motilal Oswal's research report on Info Edge (India)
INFOE delivered a strong revenue growth in 2QFY23, with a standalone revenue growth of 51% YoY (inline), led by 41% growth in the Recruitment vertical. EBITDA margin rose 250bp QoQ to 34.6% on account of lower employee and advertisement spends. Billings in 2QFY23 remained strong, but grew at a relatively slower pace (up 30% YoY to INR5.4b). The management sees clear signs of a slowdown in IT hiring, with supply pressure easing and attrition moderating. This remains a key risk, given its 60% revenue contribution to the Naukri business. We expect the Recruitment vertical to see flat to negative growth in 2HFY23. Nonetheless, it should maintain its strong revenue growth in FY23 on the back of a strong 4Q exit run-rate and good performance in 1HFY23. It should deliver 28% revenue CAGR over FY22-24. INFOE should see good growth traction in 99acres, given the high multi-year demand for Real Estate in India. Growth continues to be driven by elevated marketing spends on account of multiple players in the market. This will result in continued losses over the next few years, before 99acres reaches critical scale to be profitable.
We value its operating entities using the DCF valuation. Our SoTP-based valuation indicates a TP of INR4,020. We maintain our Neutral rating.
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