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Momentum gaining strength

IT hiring possibly turning around; reiterate Neutral on valuations

* Info Edge (INFOE) delivered in-line revenue growth in 3QFY25, with standalone revenue rising 12.8% YoY/2.4% QoQ. EBITDA margin came in at 43.1% (up 130bp QoQ/270bp YoY), beating our estimate of 40.6%. Overall billings were up 15.8% YoY and stood at INR6.7b. Reported PAT was down 6.3% YoY to INR2.0b (below our est. of 2.5b). The company’s revenue/EBITDA grew 10.9%/14.8% YoY while PAT declined 16.7% YoY in 9MFY25 compared to 9MFY24. We expect revenue/EBITDA/PAT to grow 14.7%/20.6%/28.0% YoY in 4QFY25. We reiterate our NEUTRAL rating on INFOE with a TP of INR7,100, implying a 10% downside.

Our view: Broad-based growth across businesses

* In 3QFY25, INFOE posted a decent performance across both its recruitment and non-recruitment businesses. Recruitment billings grew 15% YoY, with IT and non-IT segments achieving 16% and 17% growth, respectively. What is particularly interesting is that non-IT now accounts for over half of Naukri's revenue.

* This shows that while IT remains a key driver, the company’s diversification is starting to pay off. We expect non-IT to sustain its strong trajectory, positioning Naukri for continued double-digit growth. That said, we believe IT services still account for the lion’s share of hiring and are critical to a sustained turnaround.

* On the real estate front, 99acres also demonstrated solid growth, with billings up 16% YoY. The increase in customer numbers and average billing per customer shows that the platform is continuing to build traction. That said, the company is facing some headwinds in the new home segment, which it is actively addressing. However, with the right adjustments, 99acres seems poised to break even by FY25. For Jeevansathi, the company is focusing on improving monetization through new paywalls while maintaining growth momentum and cost control, positioning the platform to achieve breakeven as well, in our view.

* INFOE has achieved a notable margin expansion over the last few quarters, driven by reduced dependency on advertising and operating leverage. However, there is limited room for further margin expansion in the near term. We expect FY25/FY26/FY27 EBITDA margin at 41.7%/42.8%/41.7%

Valuations and change to our estimates

* We forecast standalone revenue/PAT to clock a 17%/20% CAGR over FY24- 27. Our estimates are largely unchanged. We continue to see a healthy longterm growth opportunity in its operating entities. However, the stock has rallied over the past year, and current valuations fairly price in its growth outlook.

* We value the company’s operating entities using DCF valuation. Our SoTPbased valuation indicates a TP of INR7,100. Reiterate Neutral.

In-line revenues and beat on margins; billings grew 16% YoY

* Standalone revenue stood at INR6.7b, up 12.8% YoY/2.4% QoQ, in line with our estimate.

* Overall billings rose 15.8% YoY and were INR6.7b. Billings for recruitment/ 99acres came in at INR5.0b/INR1.0b vs. INR4.2b/INR0.9b in 3QFY24.

* The recruitment business continued the uptick in 3Q, whereas non-recruitment businesses also continued to grow with reduced operating losses.

* EBITDA margin came in at 43.1% (up 130bp QoQ/270bp YoY), beating our estimate of 40.6%. The margin expansion was due to lower advertisement expenses (9.9% of revenue vs. 11.5% in 2QFY25).

* Naukri’s PBT margin was up 120bp QoQ at 58.9%, while 99acres’ PBT loss percentage decreased 930bp QoQ to 5.4%.

* Reported PAT was down 6.3% YoY to INR2.0b (below our est. of 2.5b) owing to extraordinary items of INR593m.

* The company announced the stock split in the ratio of 1:5, tentatively to be completed in two months.

Highlights from the management commentary

* Recruitment: In 3QFY25, overall billings grew by 15% YoY. Billing growth was broad-based, with the IT segment growing by 16%, the non-IT segment by 17%, and the recruitment consultant segment by 9%. Approximately 50-52% of Naukri's revenue comes from the non-IT segment. Although there are more customers in this segment, the ARPUs are lower. The company expects around 20% growth through new customer additions and pricing improvements. Key non-IT sectors, such as BFSI, healthcare, infrastructure, and manufacturing, saw robust double-digit growth. The GCC segment has performed well, with GCCs increasingly using hiring platforms as they scale up operations. IT hiring has shown some signs of recovery.

* Real Estate: Billings grew by 16% YoY in 3QFY25, driven by improvements in both the number of billed customers and the average billing per customer. The platform will continue to focus on increasing its user base. The company expressed dissatisfaction with the performance of the new home segment in real estate and is working on internal improvements. If the market and competition intensity remain reasonable, 99acres is expected to break even on a cash basis.

Valuations and view

* While we expect a gradual recovery in IT services demand in CY25, near-term recruitment growth is likely to remain range-bound as companies rely on their current bench to meet demand, resulting in overall muted growth for INFOE.

* With the management investing prudently, some of its current investments should scale up over the medium-to-long term, thereby contributing to the group’s valuation.

* We value the company’s operating entities using DCF valuation. Our SoTP-based valuation indicates a TP of INR7,100. Reiterate Neutral.

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