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Q3 slightly sub-par; Q4 outlook sluggish

Other businesses/99 acres propped overall growth

Q3 print of 7.5% YoY revenue growth was a tad below our estimates of 8% YoY, with EBITDA margin in-line at 40.5%. Q3 growth was primarily led by Education and Matrimony, up ~9% QoQ, followed by Real Estate (99 acres), up 2% YoY. However, the Recruitment business (~75% of the total business) remained tepid, with 1% QoQ deceleration due to continued softness in IT hiring. IT formed 30.7% of revenue and continued to shrink. In Q3FY24, billings for Info Edge’s (INFOE IN) education business (Siksha) surged 41.2%, propelled by early campaigns from domestic clients. For its matrimony business (Jeevansathi), billings growth and reduced marketing expenses led to improved profit margin.          

IT – Hiring slowdown continued, dragging down growth trajectory

The share of IT services in naukri.com stood at 30.7% (down 350bps YoY), similar to the ramp-down in H1, dragged down by lower IT hiring. This continued to remain the same even in Q3 with similar cautious outlook for Q4. Though non IT hiring space – Healthcare, BFSI, infra – added some strength to growth, but the slowdown in IT hiring continued to pull down overall growth. INFOE will add sales strength focused towards non-IT hiring.                  

Muted outlook, partially offset by Matrimony and Siksha

Q4 outlook seems lukewarm despite the quarter being seasonally strong for INFOE. Deferred revenue rose 11% YoY, similar to Q2 level. This was mainly because of slower IT hiring. The offsetting factor may be growth from Other businesses (matrimony and education) and Real Estate demand.            

Valuations: Maintain Accumulate; TP raised to INR 5,610

We are positive on 99acres/Naukri, but tepid demand in IT hiring continued to mount pressure (as regards matching up to solid FY23). JS is gaining momentum on the back of free chat feature. But given consistently lowering deferred sales, we see muted growth for FY24. We factor in Q3 performance and slightly raise SoTP-TP to INR 5,610 (from INR 5,230), valuing naukri.com at 58x one-year forward P/E at INR 3,723/share, 99acres at 12x (unchanged) FY25E sales at INR 292/share and Jeevansathi at 10x (unchanged) FY25E sales at INR 58/share. Maintain Accumulate on continued stable growth for the core businesses, though muted partially by weakness in IT hiring.

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