Info Edge Q4 Results Review - Non-IT To Partially Offset Weak IT Performance In 1HFY24: Motilal Oswal

Strong margin profile to sustain; maintain Neutral on valuations

• Info Edge (INFOE) delivered a healthy revenue growth in 4QFY23, with standalone revenue rising 24% YoY (in line) fueled by 27% YoY growth in the Recruitment vertical. EBITDA margin was flat QoQ at 39.1% (strong 240bp beat). Billings were healthy (up 15.3% YoY to INR7.5b) and grew ahead of our estimate, despite a slowdown in IT hiring during the quarter.

• Management sees clear sign of a slowdown in IT hiring that remains a key risk, given its significantly high revenue contribution from the Naukri business. However, INFOE is hopeful of a strong comeback in IT hiring once things improve in 2HFY24. Conversely, Non-IT hiring has picked up well and should offset some of the impact from slowdown in IT hiring. INFOE should report healthy growth in FY24 with strong demand in non-IT along with pickup in IT in 2HFY24. We expect it to deliver 15% revenue CAGR over FY23-25.

• 99acres posted a strong 4QFY23; demand is likely to remain strong with alltime low inventory, new launches and good demand for new homes. Aided by improvements made on the platform, INFOE has managed to increase traffic and enquiries while reducing marketing expenses at the same time. The marketing spends, though, remained elevated and are likely to result in continued losses for 99acres over the next few years, before it turns profitable.

• INFOE has delivered a sharp margin improvement over the last few quarters (EBITDA margin up 11pp YoY) with lower dependency on advertisement and operating leverage. We expect FY24/FY25 EBITDA margin at 36.5/37.1%.

• We forecast standalone revenue and APAT to clock 15% CAGR each over FY23-25, driven by the Naukri business.

• We continue to see a healthy long-term growth opportunity in its operating entities. With margins improving, we expect scale benefits over the next few years. However, the current valuations fairly price in its growth outlook.

• We the company’s operating entities using DCF valuation. Our SoTPbased valuation indicates a TP of INR4,010. Reiterate Neutral