The stock of online classified major Info Edge (India) was up over 6 per cent on Friday on expectations of demand improvement for Indian IT companies.
Strong revenue growth prospects for each of its online verticals – including recruitment, matrimony, real estate, education, and upside from its holdings in companies such as Zomato – had prompted Goldman Sachs to upgrade the stock.
Info Edge’s standalone revenue grew 10.6 per cent year on year (Y-o-Y) in Q2FY25, beating consensus. 99acres (+16.9 per cent Y-o-Y) and Jeevansathi (+33 per cent Y-o-Y) were drivers of growth while recruitment grew 8.5 per cent Y-o-Y.
Operating profit was up 13.8 per cent Y-o-Y to Rs 274 crore, as margin expanded 117 basis points Y-o-Y to 41.8 per cent.
Profit before tax growth of 14.8 per cent Y-o-Y to Rs 2.51 crore also beat the Street estimates.
In its pre-quarter update, Info Edge had already disclosed a 14.3 per cent Y-o-Y growth in standalone billings, highest in the last 6 quarters.
There was a recovery in both IT and non-IT segments.
The October 2024 JobSpeak Index showed an improvement of +10 per cent Y-o-Y.
The company continues to strengthen GCC and non-IT segments by improving go-to-market offerings and adding more clients.
It has been experimenting with AI-led services and products in these segments to improve user experience. Advertising spend has moderated.
In real estate, 99acres reported a +16.5 per cent Y-o-Y growth in billings in Q2FY25, led by broker-led growth.
The competitive intensity remains high. Pre-tax losses were stable, with cash losses dropping 14 percent Y-o-Y.
Matrimony and education continue to grow. The strategy of making profile listings free has worked well for Jeevansathi which saw strong revenue growth of 33 per cent Y-o-Y in Q2FY25.
In the education vertical Shiksha, revenue growth moderated to 10 per cent.
The pre-tax margin was -10 per cent in Q2 (vs +10 per cent in Q1).
Standalone revenues were at Rs 656 crore. One-offs (all non-cash) in the reported P&L included a gain of Rs 1,08 crore (from investments), and a provision of deferred tax of Rs 2,59 crore.
The downside risks include slow recovery in recruitment and weak performance of listed investments.
There is scope for growth acceleration in H2, given strong Jobspeak trends, high utilisation rates in IT, new client additions in global capability centres and non-IT sectors, and robust traction for adjacent businesses (iimjobs, Naukri Gulf and Naukri Fast Forward).
Management expects double-digit recruitment billings growth to be sustained in H2 and billings growth uptick would support margin expansion.
In 99acres, Info Edge is targeting billings growth of 18-20 per cent Y-o-Y in H2, which could move closer to break-even.
Jeevansathi margins are also now very close to break even. Cumulative operating profit margin expansion could be 500 basis points between FY24-27.
Consultant billings have also been recovering since the last quarter (after 4 consecutive quarters of decline) and grew 10 per cent Y-o-Y in Q2.
Adjacent businesses, iimjobs, Naukri Gulf and Naukri Fast Forward reported healthy billings growth of 40 per cent, 18 per cent and 27 per cent Y-o-Y, respectively.
The management noted that Jeevansathi’s marketing spends were down 36 per cent Y-o-Y, and it expects the segment to break even by the end of FY25.
The company is likely to increase AI investments going ahead. The management noted that integrating AI into operations has led to 20-25 per cent productivity improvement.
The company is currently not monetising most AI features and uses the technology only to improve customer experience.
As of Q2, the company has an AI workforce of around 100 people and will be investing in hiring more personnel leveraging LLMs, buying GPUs, and deploying AI tools.
Eventually, AI-driven services and products may also make significant revenue contributions.
The broad-based growth across segments and the positive outlook have led to ‘buy’ recommendations and target valuation upgrades.
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