Good Q2, but cautious outlook for Info Edge

Info Edge (India) reported good Q2FY24 results with hiring across other segments helping offset weak IT performance.

The revenue increased 11.5 per cent year-on-year (Y-o-Y) to Rs 593 crore, (up 1.5 per cent quarter-on-quarter or Q-o-Q).

The earnings before interest, taxes, depreciation, and amortization (Ebitda) margin was excellent at 40.7 per cent, up 200 basis points year-on-year (Y-o-Y).

Overall, the billings were up 4.8 per cent Y-o-Y to Rs 570 crore.

Management guidance continued to be cautious with a slowdown in IT hiring affecting the recruitment business.

Non-IT hiring has been doing well for the past two quarters with expansion into small towns.

The jobs portal has 94 million resumes by the end of Septe­mber, adding 3 million resumes in Q2FY24.

Travel, hospitality, and oil and gas verticals showed improved hiring traction.

The real estate business in 99acres posted robust revenue growth of 25 per cent Y-o-Y and 5.6 per cent Q-o-Q to Rs 87 crore.

The sector is expected to continue to do well.

However, due to marketing spending remaining high, there could be continued losses for 99acres in the near term.

The number of listings on the 99acres platform decreased by 2.5 per cent Q-o-Q to 1.134 million, but there was an increase of 21.8 per cent Y-o-Y in 99acres billing.

The 99acres turned cash-flow positive in Q2FY24 whereas it suffered cash losses in the year-ago period.

A change in business strategy to freemium for the matrimonial portal, Jeevan­sathi.com, seems to have led to better engagement levels and should drive revenue growth.

Revenue grew 16.7 per cent Y-o-Y to Rs 19.7 crore.

The operating loss stood at Rs 17.5 crore versus a loss of Rs 27.6 crore Y-o-Y. Shiksha, the education segment, has also seen strong traction.

Billing grew 3.7 per cent Y-o-Y to Rs 25.7 crore while revenues were Rs 30 crore (up 15.9 per cent Y-o-Y).

The company will continue to make long-term investments in the study abroad segment and focus on improving counseling services.

The Adjusted PAT was at Rs 213.7 crore versus Rs 168.1 crore (Y-o-Y) and Rs 200 crore (Q-o-Q).

The strong operating margin was positive indicating lower dependence on the advertisement.

Growth could slow in FY24 and FY25, however, which may limit the upside on margins.

A pullback to a margin of 38 per cent in FY25 is possible. Scale benefits may kick in, however, and 99Acres could go into the black in FY25 if real estate maintains momentum.

The company remains the market leader in recruitment and a strong player in real estate classifieds.

Investors will also look at its holdings in Zomato and Policybazaar where valuations have impr­oved.

Info Edge has always received high valuations, however, and it may be close to fair value.

Recommendations range from “neutral” to “hold” to “add”.

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