Neutral Info Edge Ltd for the Target Rs 1,250 by Motilal Oswal Financial Services Ltd
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Improving execution amid uneven hiring trends 99acres nearing breakeven; lower competitive intensity aids margins
* Info Edge (INFOE)’s standalone revenue stood at INR8.2b in 1QFY27, up 12% YoY/2.4% QoQ, in line with our estimate of ~INR8.1b. EBITDA margin came in at 44% (up 60bp QoQ), above our estimate of 41.5%. Total billings rose 14.4% YoY to INR7.4b.
* Adj. PAT was up 22.3% YoY to INR3.1b (vs. our est. of INR2.9b).
* In 1QFY27, INFOE’s revenue/EBITDA/adj. PAT grew 12%/30.6%/22.3% YoY. In 2QFY27, we expect its revenue/EBITDA/adj. PAT to grow 14.0%/19.2%/ 14.5% YoY. We reiterate our Neutral rating with a TP of INR1,250, implying a 2.5% downside.
Valuations and changes to our estimates
* We raise our estimates by ~4% for FY27/FY28, reflecting better execution across Recruitment and 99acres. While premiumization and newer monetization initiatives are supporting Naukri, the hiring environment remains uneven, limiting the scope for acceleration in recruitment growth.
* Margin visibility has improved, led by lower costs and better operating leverage, with 99acres also benefiting from lower competitive intensity. However, with recruitment growth still moderate and newer offerings yet to establish sustained monetization, we see limited scope for a meaningful earnings upgrade from here. Current valuations also appear to capture much of the near-term improvement.
* We value the company’s operating entities using DCF valuation. Our SoTP-based valuation indicates a TP of INR1,250. Reiterate Neutral.
Highlights from the management commentary
* Recruitment: Billings grew over 17% and revenue 13% YoY; operating profit rose 25% at an operating margin of ~58%, with cash from operations up 36%.
* Adjusting for renewal timing (some clients renewing early/deferred), underlying billings growth is estimated at ~15%, a sequential improvement versus recent quarters.
* 99acres: Billings and revenue both grew 17% YoY; operating PBT losses narrowed 89% QoQ, bringing the business close to breakeven (loss narrowed to INR 20m this quarter from an adjusted INR 170m last quarter, after excluding a one-off accounting gain).
* Growth was delivered alongside disciplined marketing spend, underscoring operating leverage as the business scales; management guided toward the business turning cash generative in FY27.
* Management does not view AI as a disintermediation risk for Recruitment, Real Estate, or Matchmaking, citing proprietary two-sided data and two decades of domain knowledge; Shiksha is viewed as structurally more exposed given its third-party traffic dependence.
Valuation and view
* We raise our estimates by ~4% for FY27/FY28, reflecting better execution across Recruitment and 99acres. While premiumization and newer monetization initiatives are supporting Naukri, the hiring environment remains uneven, limiting the scope for acceleration in recruitment growth.
* Margin visibility has improved, led by lower costs and better operating leverage, with 99acres also benefiting from lower competitive intensity. However, with recruitment growth still moderate and newer offerings yet to establish sustained monetization, we see limited scope for a meaningful earnings upgrade from here. Current valuations also appear to capture much of the near-term improvement.
* We value the company’s operating entities using DCF valuation. Our SoTP-based valuation indicates a TP of INR1,250. Reiterate Neutral.
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