MOSL: INFO EDGE INDIA (Buy)-Revenue beat led by 99acres; Margins bogged down by increased ad expenses

Info Edge India: Revenue beat led by 99acres; Margins bogged down by increased ad expenses

(INFOE IN, Mkt Cap USD2.1b, CMP INR1302, TP INR1550, 19% Upside, Buy)

• Real Estate growth returns: INFOE’s standalone 4QFY18 revenue of INR2.4b grew 16% YoY, driven by 13% YoY growth in Naukri.com, 36% YoY growth in 99acres.com and 11% YoY growth in other businesses. While Naukri.com is being impacted by continued weakness in IT hiring, the worse seems to be behind for Real Estate. With RERA-related uncertainties too unwinding, robust growth can be expected in this business.
• Ad expenses weigh on margins: EBITDA margin contracted 1,000bp QoQ (-570bp YoY) to 24.7%, primarily due to a sharp increase in ad & promotion expenses (+87% QoQ, +120% YoY). Advertising ramp-up across businesses to consolidate market share is likely to continue over the near term. Adj. PAT rose 72% YoY to INR566m (est. of +105% YoY to INR675m), led by revenue beat, EBITDA miss and lower ETR. Reported PAT included impairment losses of INR703m associated with investee companies.
• Estimate change: Factoring in the revenue beat led by 99acres.com and higher growth in the segment going forward, we have revised up our revenue estimate by 3%. However, we reduce our margin assumptions because of increased advertising expenditure, resulting in a downward earnings revision of 5% for both FY19 and FY20.