This bluechip turned Rs 40,000 to over Rs 5 lakh in 10 years; should you buy?
Analysts retained their bullish on the company, citing dominant market share in its core businesses and strong balance sheet
Info Edge, a pure-play internet company — operating in businesses such as online recruitment, real estate, matrimony, and others — has been buzzing on Dalal Street due to its superlative performance during the past 10 years.
The shares of India’s largest listed online player have surged 1,267% to Rs 4,978 on June 21, 2021 from Rs 364.25 on the same day in 2011. This means an investment of Rs 40,000 made in the company ten years ago has now grow to Rs 5.47 lakh. On the other hand, the benchmark BSE Sensex has gained nearly 200% during the same period.
Of late, analysts retained their bullish on the company, citing dominant market share in its core businesses and strong balance sheet.
Financials
The company on June 21 posted over two-fold jump in its consolidated net profit to Rs 308 crore for the quarter ended March 2021. It had registered a consolidated profit of Rs 119 crore in the year-ago period.
Its consolidated revenue from operations, however, fell 9.4% to Rs 296.5 crore in the January-March 2021 quarter from Rs 327.5 crore in the year-ago period.
Info Edge CFO Chintan Thakkar said the company has witnessed continued recovery during the quarter, led by billings growth in Naukri India and 99acres by 26% and 41.5%, respectively, over the fourth quarter billings of FY20.
“As compared with Q4 of FY’19, a pre-pandemic quarter, the billings in Naukri India and 99acres have grown 16.7% and 7.55%, respectively,” he added.
Overall, gross sales of the company has grown 13% annually to Rs 1120 during the past 10 years, while net profit jumped by over 36% annually to Rs 1407 crore in FY21. The bottomline of the company stood at Rs 63 crore in FY11.
The company also had a cash balance of Rs 3,592 crore as of March 31, 2021, and would receive Rs 750 crore from monetisation of some of its stake in upcoming Zomato’s IPO, which would be largely utilised for merger and acquisition opportunities in core business areas.
Strong recovery across its segments
Management witnessed a strong recovery in collections and billings across its business segments in Q4FY21. Recruitment and 99acres billings strongly recovered to 22.1% YoY and 41.1% YoY growth, respectively, while Jeevansathi billings continued to grow at 12.2% YoY in the March quarter. Management further indicated that both job seekers and recruiters’ engagement on its Naukri.com portal improved further, while it witnessed strong growth in new owner listings on its portal.
Further, the second wave of Covid-19 has negligible impact on the recruitment business, while the company witnessed a sharp drop in terms of traffic on the 99acres portal in the first two months of Q1FY2022. However, traffic on the 99acres portal has bounced back significantly in June 2021. The company further said that traffic gains over the past 18 months on the Jeevansathi portal have translated into higher revenue growth. Hence, Info Edge would continue its aggressive investments in Jeevansathi business to acquire profiles and drive growth going ahead.
Analysts see strong growth revival in FY2022E, given the recovery in economic activity, pent-up demand in new/resale homes, higher hiring activities, and an increasing attrition rate.
Should you buy now?
With a gain of 4% YTD, shares of Info Edge have underperformed the benchmark BSE Sensex which advanced 10% during the same period. Going ahead, brokerage Sharekhan believes that shares of the company can hit Rs 6,100.
“We have fine-tuned our estimates for FY2022E/FY2023E, factoring in strong billings growth across segments and minimal impact on recruitment business in the second wave of Covid-19. We expect revenue and margins to improve sharply in subsequent years, led by improving economic activity, rise in recruitment across sectors, strong recovery in 99acres.com business, and continued growth momentum in Jeevansathi and Shiksha businesses,” Sharekhan said.
Edelweiss Securities has a ‘Hold’ rating on the company with a price target of Rs 5,460. “Info Edge reported lower-than-expected Q4FY21 revenue and margin. However, traffic and billings are now well above pre-covid levels, pointing to a recovery in the business. We see the limited impact of the second covid wave as the disruption in the recruitment business, especially for the technology sector and white-collar in general, has been minuscule,” Edelweiss said.