2022 has largely been volatile for Info Edge which operates online job portal Naukri.com, matrimony website Jeevansathi.com and real estate platform 99acres.
While the stock was able to gain 31 percent from its 52-week low of ₹3,314, hit in May 2022, it is still down more than 35 percent from its 52-week high of ₹6,695, hit in November last year.
On a year-to-date basis, the stock has lost over a quarter of its investor wealth and is down 25 percent.
The stock has been positive in six of the 11 months of 2022 -- considering the positive trend in November so far -- while giving negative returns in the remaining five. This month so far, the stock has added 6 percent following a 1.5 percent rise in October. However, in September, the stock lost 11 percent.
Now that the stock has corrected massively, is it time to put it on your watchlist? Domestic brokerage house Motilal Oswal doesn't think so.
While the brokerage has a 'neutral' call on the stock, it has a target price of ₹4,020 for the stock, implying a potential downside of another 8 percent.
As per the brokerage, signs of a slowdown in IT hiring, with supply pressure easing and attrition moderating remain a key risk, given its 60 percent revenue contribution to the Naukri business.
However, MOSL continues to see a good long-term growth opportunity in its operating entities, with a margin improvement, as scale benefits are seen over the next few years. The current valuations fairly price in its growth outlook, it says.
"Though near-term growth in Recruitment is expected to be impacted by lower IT demand, good medium-term growth in Recruitment and a rebound in demand in Real Estate should help it deliver 26 percent revenue CAGR over FY22-24. With the management investing prudently, some of its current investments should scale up over the medium-to-long term, further contributing to the group’s valuation," explained the brokerage.
In the September quarter (Q2FY23), the firm posted a net profit of ₹94 crore. However, the company said this is not comparable with the profit of the September quarter of 2021 because it incurred an exceptional gain of ₹8,269.2 crore from the public listing of the food tech Zomato, in which Info Edge holds a considerable stake.
The company had reported a net profit of ₹7,372.2 crore in the year-ago quarter.
Its revenue from operations surged 65 percent to ₹604.1 crore during the September quarter. Its total expenses also jumped 90 percent to ₹522.8 crore in Q2 FY23 versus ₹275.8 crore in the year-ago period.
The company said that the biggest chunk of the total expenditure was employee expenses, which grew 71 percent year-on-year (YoY) to ₹300 crore.
Revenue from its recruitment solutions business rose 60 percent to ₹436 crore, the real estate segment grew 46 percent to ₹70 crore, and other businesses expanded 120 percent to ₹99 crore.
The brokerage said that it expects the recruitment vertical to see flat to negative growth in 2HFY23. Nonetheless, the firm should maintain its strong revenue growth in FY23 on the back of a strong 4Q exit run-rate and good performance in 1HFY23, it added. The brokerage sees the firm delivering 28 percent revenue CAGR over FY22-24.
"There is a strong bounce back in non-IT demand. Many industries saw headcount shrink during the COVID-led lockdowns, which is now normalizing. Info Edge is seeing good demand in the Retail, Telecom, BFSI, and Travel sectors. It expects a continued increase in non-IT realizations. The demand for IT was driven by higher attrition rates and exceptional hiring in the last seven quarters, which is now moderating. The pace of moderation remains unclear," MOSL added.
It expects the standalone revenue/APAT to clock 26 percent/29 percent CAGR over FY22-24, driven by a strong acceleration in the Naukri business.
However, in a contrarian view, brokerage firm JM Financial raised its target price for Info Edge from ₹5,420 to ₹5,450, which implies an upside potential of 24.5 percent from the current market price.
“We raise our standalone FY23-25E EPS by 5-7 percent, factoring in better than expected operating performance and treasury income in 2Q. Our SOTP-based TP for Info Edge (Naukri @55x FY24E EPS, 99acres @7.5x FY24E Sales, Jeevansathi @3x FY24E Sales and 25 percent holding company discount to our published valuations for Zomato and Policybazaar) increases a tad to ₹5,450 from ₹5,420,” said the brokerage.
A MintGenie poll of 21 analysts shows a ‘buy’ call on the stock.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.