MOSL: INFO EDGE INDIA (Buy)-Ahead of estimates, but uncertainty clouds near term

​Info Edge India: Ahead of estimates, but uncertainty clouds near term

(INFOE IN, Mkt Cap USD1.9b, CMP INR984, TP INR1130, 15% Upside, Buy)

• 1Q beat on 99acres surprise and cost containment: INFOE's 1QFY18 standalone revenue grew 12.6% YoY to INR2,225m (2% beat). While revenue growth in the Recruitment business showed 10.4% YoY growth (est. of + 13.5%), real estate portal 99acres.com grew 12.6% YoY, well ahead of our flat revenue estimate. EBITDA grew 47.2% YoY (11% beat) on the back of a stable cost base (+1.1% YoY).
• Risks to near-term growth in key business segments: INFOE cited that growth in Recruitment fell below its own expectations for the quarter, and the muted outlook in IT Services hiring keeps the prospects uncertain for now. Even in the real estate sector, weakness in the underlying market is compounded by confusion following the impact of RERA. This may be followed by some consolidation of the smaller builders and brokers once RERA takes full effect.
• Competition at bay for now: INFOE's traffic share in Naukri.com was a healthy 74% excluding Indeed and 60% including Indeed. While Google recently launched its AI-powered job search engine, INFOE expects it to first battle it out with Indeed in the US, and while it continues to keep a close watch, business fundamentals at present are not getting challenged by competitive pressures. Similarly, the launch of UberEats affected Zomato's traffic share for a fortnight and online ordering for a month after launching, but both those metrics are back in place, reinstating Zomato's dominance in the category.