Service sector

Buy this large-cap services sector multibagger stock for 20% upside potential: HDFC Securities

Stock market outlook

On August 22, it opened at Rs 4,430 apiece, currently trading at Rs 4,258.70 apiece, down 4.39%. The current market price is Rs 945.7 above the 52-week low of Rs 3,313 and Rs 3,206.7 below the 52-week high of Rs 7,465.40.

Returns on investment

Returns on investment

The previous week, the company’s shares returned negative 3.86%. While over the past 1 and 3 months, stocks have returned positive 3.84% and 22.12%, respectively. Over the year, the shares gave a negative return of 20.96%. Over the past 3 and 5 years, stocks have had massive returns. In 3 years, shares have jumped 107.55%, giving multibagger returns. Whereas over the past 5 years the stock has given a multibagger return of 353.04%.

Other details

Other details

Info Edge (India) Limited is a major service sector stock with a market capitalization of Rs 55,107 crore. Stock’s TTM PE ratio is 4.31 and P/B ratio is 3.06, respectively. TTM EPS is Rs 990.63. Its ROE is 74%. While the dividend yield is 0.30% and the face value is Rs 10.

T1FY23 Highlights

T1FY23 Highlights

(1) Infoedge revenue stood at Rs 5.07 billion (against an estimate of Rs 4.26 billion), recording a growth of 11.4% QoQ, driven by +12.4/ +8.2/+9.0% QoQ recruitment growth/99acres/Jeevansathi+Shiksha.

(2) Billing in Q1FY23 increased +65/173/-1% YoY for Recruitment/99 Acres/Other Verticals respectively.

(3) Segment EBITDA margin for Recruitment/99acres/Jeevansathi/Shiksha was +59.6/-53/-132/+25% respectively in FY22.

(4) EBITDA margin increased by 403 basis points QoQ to 32.1% versus our estimate of 31.1%.

(5) The Job Speak Index is up 21% YoY on July 22, indicating a robust demand environment.

(6) Net cash amounts to Rs 37 billion and Zomato/Policybazaar accounts for 10/4% in SoTP.

Outlook

Outlook

The brokerage said: “We are forecasting a revenue CAGR of 25%, led by a CAGR of 28/20/-7/28% in recruiting/99acres/Jeevansathi/Shiksha over FY22-24E. EBITDA margin amounted to 34/38% for FY23/24E, leading to an EPS CAGR of 24% for FY22-24E.”

The power of the core

The power of the core

Infoedge had a strong quarter, with both revenue (+11.4% vs. quarter) and margin above estimates. Growth was driven by the core recruitment segment (+12.4% QoQ) while Shiksha/99acres posted growth of ~29/8% QoQ. Recruitment growth (Naukri) over the past 4-5 quarters has been fueled by strong hiring in the IT sector; this quarter, it was led by the non-IT sectors (BFSI, travel, infra and hospitality). Naukri, with a traffic share of around 80%, remains a top choice for newer/bulk hires, resulting in better prices. The real estate portal (99 acres) saw 35% year-over-year growth and will continue to be a vertical target with higher investments. Matchmaking business (Jeevansathi) is struggling despite heavy marketing spend and discounts. The company began offering entry-level packages for free to attract traffic to the wedding portal, which resulted in a decline in revenue of approximately 10% compared to the previous quarter.

Buy for a target price of Rs 5,070

Buy for a target price of Rs 5,070

Commenting on the stock, the brokerage said, “We expect Infoedge to post strong growth, driven by the recruiting/99acres/Shiksha segment and the margin to increase due to non-linearity (Naukri at 59.6 % EBITDA Margin).We increase estimate by 6-8% and maintain BUY with SoTP based TP of Rs 5,070, valuing Flagship Recruitment activity at 45x EV/EBITDA, allocating 5x EV/sales multiple at 99 acres and 3x to Jeevansathi and Shiksha, while Zomato and Policybazaar were awarded market value (~15% discount).”

About - Info Edge (India) Limited

About – Info Edge (India) Limited

Info Edge has a deep understanding of the Indian consumer internet domain. With years of experience in the field, strong cash flow generation and a diverse business portfolio, it is one of the very few profitable pure-play internet companies in the country.
The company was incorporated on May 1, 1995 under the Companies Act 1956 as Info Edge (India) Private Limited and became a limited company on April 27, 2006. Starting as a recruitment business in classified online, naukri.com, Info Edge has grown and diversified rapidly, setting benchmarks as a pioneer for others to follow. Driven by innovation, creativity, an experienced and talented management team and a strong corporate culture, it is now India’s leading online classifieds company in the areas of recruitment, marriage, real estate, education and related services.

Disclaimer

Disclaimer

The security was selected in the brokerage report of HDFC Securities. Greynium Information Technologies, the author and the respective brokerage are not responsible for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before making any investment decision.