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Surprisingly strong outlook notwithstanding 2nd wave

To our and even management’s surprise, billing increased 40% QoQ despite the panic around the 2nd covid wave beginning March 2021. This was 25% above our estimates and largely driven by the robust volume increase at Naukri. In this backdrop, the company made higher variable pay-outs (~130-140%) to sales team. In conjunction with partial salary hike and some one-off provisions, reported margins missed our estimates.

Key takeaway is the management commentary on recruitment and matrimony segments not seeing any impact even in April and May despite stringent lockdowns. While 99 Acres was impacted, we understand traffic bounced back sharply in June. As highlighted (link), we were anticipating a sharp recovery in white collar hiring activity from H2FY22 - post the normalisation of 2nd wave. However, the quick pace of recovery & the strong outlook surprised us.

Naukri will be a key beneficiary given its near monopoly positioning (80%+ traffic share) in white collar hiring. Potential for price increases and operating leverage should translate into buoyant EBITDA margins. We upgrade FY22-23E EPS by ~5%. Reiterate Info Edge as TOP BUY idea in our coverage. Impending IPOs of investee firms (Zomato & Policybazaar) should be key catalysts for value unlocking.

* In-line revenue; margin miss due to higher variable pay-outs and provisions. Reported revenue was largely in-line with our / street estimates. However, EBITDA margin was lower than our estimates. This was led by (1) higher variable pay-outs to sales team (in the range of 130-140%) in the back drop of a stronger than anticipated pick up in billing, (2) partial impact of salary hikes and (3) one-off provisions.

* Strong lead indicators; sharp recovery in hiring seems to be at play. Overall billing witnessed a robust increase in Mar-21 (+40% QoQ, 25% YoY and 25% above our expectations) notwithstanding the panic around the 2 nd wave beginning March. The strength in billings seem to be led by Naukri (+26% YoY), especially on the volume front. Notably, the billing run-rate in Mar-21 is 15% higher than the pre-covid peak (Mar-19), with billing run-rate in Naukri being 17% higher.

To our and even management’s surprise, recruitment and matrimony segments were not impacted even during April and May despite stringent lockdowns. Even as 99 Acres was impacted, we understand traffic bounced back sharply in June. While we anticipated a sharp recovery in white collar hiring from H2FY22, the pace of recovery was a big surprise. Potential for price increases and operating leverage should translate into buoyant EBITDA margins. We upgrade FY22-23E EPS by ~5% to factor in the quicker-than-anticipated recovery. Reiterate Info Edge as TOP BUY idea in our coverage. Impending IPOs of investee companies (Zomato & Policybazaar) should be key catalysts for value unlocking.

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