IGI Logo

Another steady performance

Info Edge (IEL) posted Q2FY22 financial performance in line, but the strong growth in billing points to improving growth trends. Overall billing was up 61.3% YoY with recruitment, real estate and Shiksha growing YoY by 73.9%, 45.9% and 74.7%, respectively.

While macro tailwinds and leadership position are helping IEL’s core business, the stock’s re-rating is a result of the Zomato and PolicyBazaar IPOs triggering a valuation re-rating of investee companies. With no new IPO of an investee company in the pipeline, IEL’s stock will move in tandem with traction in core business. We maintain our estimates broadly and ‘HOLD’ with a revised TP of INR6,484 (up from INR5,981) on a valuation rollover to Q4FY23E.

Strong billing growth indicates improving growth trajectory

IEL reported 37.3% YoY Q2FY22 revenue growth to INR3.5bn, broadly in line with Street’s estimate. EBITDA margin jumped 1,010bps YoY to 30.2% (Street: 30.8%). The company has resumed its advertising spends as economy returns to normalcy. In the recruitment business, IEL is seeing strong growth in IT/ITES as well as other segments. Billing growth was strong – 61.3% YoY – with recruitment and real estate, reporting 73.9% YoY and 45.9% YoY growth, respectively, albeit on a lower base. With strong billing growth, we expect revenue growth to continue to be strong. As the recruitment and real estate markets remain buoyant, advertisement cost may not rise much, but technical manpower cost will weigh on margins.

No immediate valuation re-rating triggers

While IEL’s core business is on improving trajectory, its 27% excess stock return (versus NIFTY) over the last six months is attributable to a significant valuation rerating of Zomato and PolicyBazaar in the wake of their public market debuts, compared to their historical private market valuations. As there is no IPO of an investee company in the pipeline, the odds of a further rerating are low; the stock performance will hence depend on how core business does, stock performance of Zomato and PolicyBazaar, and pace of investments in core and non-core portfolios

Outlook and valuation: Growth priced in; maintain ‘HOLD’

Growth prospects for IEL appear bright with momentum in the recruitment segment poised to sustain and recovery in the real estate segment on the anvil. However, valuations (98.6x FY23E EPS for core business) are rich. We maintain ‘HOLD/SN’ with an SoTP-based TP of INR6,484 as we roll over to Q4FY23E.

To Read Complete Report & Disclaimer Click Here

Please refer disclaimer at https://www.edelweiss.in/disclaimer
SEBI Registration No. INH000000172

Above views are of the author and not of the website kindly read disclaimer