MOSL: INFO EDGE INDIA (Buy)-Improving outlook in core segments

Info Edge India: Improving outlook in core segments

(INFOE IN, Mkt Cap USD2.4b, CMP INR1348, TP INR1550, 15% Upside, Buy)

• Continued traction in Naukri and 99acres: INFOE's standalone 1QFY19 revenue increased 17% YoY to INR2.6b (in line), driven by growth of 15% YoY in Naukri, 34% YoY in 99acres and 7% YoY in other businesses. Both Naukri and 99acres have been seeing stronger growth since last quarter, while the outlook for Recruitment has also improved (on the back of a pick-up in IT hiring) and Real Estate is coming off its worse.
• Lower ad expenses benefit margins: EBITDA margin expanded 90bp YoY to 32.5% (360bp beat v/s our estimate of 28.9%). The beat was a function of lower-than-expected ad expenses, which contributed 450bp delta, offset partly by higher salary expenses. Ad expenses increased by 48% YoY, but reduced by 21% QoQ. Adjusted PAT increased 23% YoY to INR790m, exceeding our estimate by 21% - a direct result of the operating profit beat. Reported PAT included INR160m relating to the diminution in the carrying value of Canvera.
• Increased stake in PolicyBazaar; Zomato focusing on ordering: PolicyBazaar recently concluded a round of funding, raising USD200m. INFOE took part in this round (unlike the previous rounds), given the better financial performance and the improved outlook. The other investee company Zomato has been seeing a shift in focus toward delivery by itself. From 5.5m orders a month in March, it has already reached 12m orders. Other initiatives like Zomato Gold and Piggybank, too, are seeing a strong response.