Wednesday, June 13, 2012

>Info Edge (India) Ltd.

India Summit: Management Meeting Takeaways

Quick Comment: Management indicated that its internal targets would be lower than actual performance last year and it needs to wait and watch 1Q trends to get better picture of fiscal 2013 revenue outlook. Management maintains its cautious outlook on the recruitment business and indicated that the outlook for collections in Naukri remains uncertain. 4Q revenue growth was a positive surprise and could have been driven by market share gains. Management expects 99 Acres revenues to keep growing even in the current uncertain environment, due to low penetration. Stable margin outlook if revenue growth momentum continues: Management believes that margins could remain stable if revenues grow by 20%+ yoy in FY13e.
Info Edge has so far invested Rs1.32bn and owns between 38% and 48% of its various investee companies. It is seeking co-investors in few of its investee companies.

Our view: Despite the weak macro, we believe recruitment revenues should be able to grow ~20% yoy with stable margins in FY13e. Overall, we forecast consolidated revenue growth of ~22% yoy with EBIT margins of 28% (+80bps yoy) and net income growth of 11% yoy in FY13e due to our assumption of lower non-op income and lower gains from associates companies.

Maintain EW: The stock is already trading at rich multiples of 38x FY13e and 36x FY14e EPS for earnings CAGR of 15% over FY12-14e, which limits any material upside from the current levels in our view.

Risks: Slower than expected revenue growth in recruitment or higher / lower than expected losses contributed by either its other verticals or subsidiaries, are the key upside/downside risks to our estimates.