Info Edge, the parent company of renowned portals like Naukri.com and 99acres.com, recently disclosed its second-quarter results, showcasing a mixed performance. While the EBITDA margin saw a notable expansion and 99acres.com exhibited robust growth, challenges in the IT hiring sector continue to cast a shadow on the company’s overall revenue outlook.
Key Financial Highlights
1) EBITDA Margin Expansion – The Q2 FY24 results witnessed a commendable EBITDA margin expansion of 187 basis points, reaching 40.7%. It was primarily attributed to a reduction in operating expenses.
2) Recruitment Solutions – The recruitment sector, constituting a significant portion of Info Edge’s revenue, faced headwinds due to the persistent IT hiring slowdown. Year-on-year billing growth was modest at 1)4%, and sequential revenue growth of 2)2% couldn’t offset the impact of declining unique customers.
3) 99acres.com’s Stellar Performance – In contrast, the real estate vertical, spearheaded by 99acres.com, reported a remarkable billing growth of 25.6%, reaching Rs 92)2 crore. This surge is indicative of a vibrant domestic real estate market.
4) Dividend Announcement – Info Edge declared an interim dividend of Rs 10 per share for the fiscal year 2023-24, underscoring the company’s commitment to shareholder value.
Challenges and Opportunities
1) IT Hiring Slowdown – The prevalent slowdown in IT hiring continues to pose challenges for Info Edge, especially with a substantial portion of its recruitment business reliant on the IT/ITeS sector. The management highlighted the uncertainty surrounding a quick turnaround, given previous over-hiring during the Covid period.
2) Diversification Efforts – The company’s foray into non-IT hiring sectors like infrastructure and BFSI becomes crucial to mitigate the impact of the IT hiring slump on the top-line growth.
3) Real Estate Market Dynamics – The robust performance of 99acres.com, driven by a strong real estate market, provides a counterbalance to the challenges in the recruitment sector—the platform’s ability to capitalize on lower inventories and sustained demand positions it favourably.
Market Outlook and Analyst Perspectives
1) Valuation and Rating – With an FY25 PE of 59.6 times, Info Edge’s current valuation is perceived as steep. Analysts recommend an equal-weight rating, emphasizing that while eventual growth in the recruitment business is anticipated, immediate opportunities for fresh investment might be limited.
2) Brokerage Perspectives – Brokerages vary in outlook, with some expressing optimism about Info Edge’s long-term prospects, citing the company’s strong performance in the non-recruitment sectors. However, concerns linger over the Naukri.com business due to the softness in IT demand.
3) Stock Performance – Info Edge’s stock witnessed a 2% gain after the Q2 FY24 results, reflecting a mixed sentiment among investors. While Bernstein and Nomura remain bullish, Motilal Oswal adopts a neutral stance.
Summary
Info Edge’s Q2 FY24 results present a nuanced narrative of resilience in the real estate sector juxtaposed with the challenges posed by the ongoing IT hiring slowdown. Navigating these dynamics requires a strategic approach, emphasizing diversification and capitalizing on strengths. As the company strives to balance its recruitment and real estate verticals, the market will keenly observe its ability to weather the current uncertainties and emerge stronger in the long run.
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