Buy This Large Cap Service Sector Multibagger Stock For 20% Potential Upside
22 August, it was opened at Rs 4,430 apiece, currently trading at Rs 4258.70 apiece, slid down 4.39%. The current market price is Rs 945.7 above the 52-week low level of Rs 3,313 and Rs 3,206.7 below the 52-week high of Rs 7,465.40.
Returns on Investment
The previous week, the stocks of the company gave a negative return of 3.86%. Whereas, in the past 1 and 3 months, the stocks gave a positive return of 3.84% and 22.12%, respectively. Over the year, the stocks gave a negative return of 20.96%. In the past 3 and 5 years, the stocks gained massive returns. In 3 years, the stocks surged 107.55%, giving multibagger returns. Whereas, in the past 5 years, the stocks gave a whooping 353.04% multibagger returns.
Info Edge (India) Limited is a large service sector stock having a market cap of Rs 55,107 crore. Stock’s TTM PE ratio is 4.31 and the 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.
(1) Infoedge revenue stood at Rs 5.07bn (vs. estimate of Rs 4.26bn), registering 11.4% growth QoQ, driven by +12.4/+8.2/+9.0% QoQ growth in recruitment/99acres/Jeevansathi+Shiksha.
(2) Billing in Q1FY23 was up +65/173/-1% YoY for recruitment/99acres/other verticals respectively.
(3) Segmental EBITDA margin for recruitment/99acres/Jeevansathi/Shiksha stood at +59.6/-53/-132/+25% respectively in FY22.
(4) EBITDA margin was up 403bps QoQ to 32.1% vs our estimate of 31.1%.
(5) Job speak index is up 21% YoY in July-22 indicating a robust demand environment.
(6) Net cash stands at Rs 37bn and Zomato/Policybazaar account for 10/4% in SoTP.
The brokerage said, “We expect revenue CAGR of 25%, led by 28/20/-7/28% CAGRs in recruitment/99acres/Jeevansathi/Shiksha over FY22-24E. EBITDA margin estimates stand at 34/38% for FY23/24E, leading to an EPS CAGR of 24% over FY22-24E.”
The power of core
Infoedge posted a strong quarter, with both revenue (+11.4% QoQ) and margin coming ahead of estimate. The growth was led by the core recruitment segment (+12.4% QoQ) while Shiksha/99acres posted ~29/8% QoQ growth. The growth in recruitment (Naukri) for the last 4-5 quarters was powered by strong hiring in the IT sector; this quarter, it was led by the non-IT sectors (BFSI, travel, infra, and hospitality). Naukri, with ~80% traffic share, remains a preferred choice for fresher/bulk hiring, leading to better pricing. The real estate portal (99acres) registered 35% YoY growth and will continue to be a focus vertical with higher investments. The matchmaking business (Jeevansathi) is struggling despite heavy marketing spending and discounts. The company has started offering entry-level packages for free to attract traffic on the matrimony portal, which led to a ~10% QoQ drop in revenue.
Buy for a target price of Rs 5,070
Commenting on the stock, the brokerage said, “We expect Infoedge to post strong growth, led by recruitment/99acres/Shiksha segment and margin will expand due to non-linearity (Naukri at 59.6% EBITDA margin). We raise the estimate by 6-8% and maintain BUY with a SoTP-based TP of Rs 5,070, valuing the flagship recruitment business at 45x EV/EBITDA, assigning 5x EV/sales multiple to 99acres and 3x to Jeevansathi and Shiksha, while Zomato and Policybazaar have been assigned the market value (~15% discount).”
About – Info Edge (India) Limited
Info Edge has an in-depth understanding of the Indian consumer internet domain. With years of experience in the domain, strong cash flow generation, and a diversified 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 public limited company on April 27, 2006. Starting with a classified recruitment online business, 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 leadership team, and a strong culture of entrepreneurship, today, it is India’s premier online classifieds company in recruitment, matrimony, real estate, education, and related services.
The stock has been picked from the brokerage report of HDFC Securities. The Author and the respective Brokerage House are not liable for any losses caused as a result of decisions based on the article.