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Full-on display of very strong fundamentals

Info Edge (INFOE) in 4Q reported another sturdy operating performance amidst another quarter of depressed expectations. Recruitment vertical billings growth of 13.7% YoY was well ahead of market expectations; even JMFe was just +4.2%. There was solid growth in both realisation (+5.5%) as well as unique customers (+7.7%). Billings was also robust and ahead of expectations in Real Estate (+30.8% YoY) and Shiksha (+42.5% YoY). As if that wasn’t enough, EBITDA of INR 2.2bn was ahead of JMFe/Cons. by 3.1%/4.1%, despite slight miss on revenue. It means the strong billings beat across businesses was achieved despite the company slowing down its discretionary spend. That said, we are mindful of the management’s hazy near-term commentary on IT hiring, but expect strong hiring in non-IT (3x-4x of GDP growth) to support high-single digit growth in recruitment billings over the next 1-2 quarters. Thereafter, we expect growth to rebound to mid-teens basis historical bounce-backs in offshored jobs’ demand. Standalone margin should also expand, driven by improving profitability in 99acres/Jeevansathi. We believe the results again showcase INFOE’s strong fundamentals and ability to stand out amidst tough market situations, which, in turn, deserves strong valuations. Our SOTP implies standalone business valuation of 53x Jun’25 PER (vs. long-term 1-yr fwd. average of 60x).

* Billings beat continues amidst hazy outlook: Standalone billings grew 15.3% YoY to INR 7.49bn (+36% QoQ, due to seasonality), ahead of JMFe by 11.9%. Recruitment billings grew +13.7% YoY as strong demand in non-IT offset the IT slowdown impact. The company continued to report very strong revenue growth of 23.8% YoY on the back of strong billings over TTM to reach INR 5.64bn, albeit missing JMFe/Cons. by 4.5%/1.5%. While Recruitment/99acres/Shiksha reported 27%/23%/31% revenue growth on YoY basis, Jeevansathi’s revenue was down 26%. We expect high teen’s revenue growth for standalone business in FY24, even if recruitment billings were to shrink to high-single digit in 1HFY24, due to ~24% YoY rise in deferred sales in FY23.

* Robust margin delivery continues: Standalone EBITDA in 4Q grew 72.1% YoY to INR 2.20bn, ahead of JMFe/Cons. by 3.1%/4.3%, as lower-than-expected employee cost and A&P spend (in 99acres and Jeevansathi) offset revenue miss. This led to EBITDA margin improving c.11ppts YoY to 39.1% (flat QoQ), ahead of JMFe/Cons. by 290bps/216bps. Segmentally, recruitment EBITDA margin improved 197bps QoQ to 62% (+302bps vs. JMFe), with 99acres and Jeevansathi also reporting better-than expected margins of - 25.3% and -116%, amidst high competitive intensity. We forecast 160bps margin expansion in FY24 due to stabilisation of employee salaries and controlled A&P spend in 99acres/Jeevansathi.

* Raise estimates; reiterate BUY with revised base case FV of INR 4,950: We raise our standalone FY24-25E EPS by 2-5%, factoring in better-than-expected EBITDA in 4Q. We roll forward to derive SOTP-based Jun’24 FV of INR 4,950, in which we continue to value Naukri @45x FY25E EPS, 99acres @6x FY25E Sales, and Jeevansathi @3x FY25E Sales, and give 25% holding company discount to CMP for Zomato and Policybazaar stake.

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