MOSL: INFO EDGE INDIA (Buy)-Pick-up seen in Recruitment and 99acres

Info Edge India: Pick-up seen in Recruitment and 99acres; Sold a small stake in Zomato to Ant Financial

(INFOE IN, Mkt Cap USD2.6b, CMP INR1347, TP INR1550, 15% Upside, Buy)

• 3Q largely in line: 3QFY18 standalone revenue grew 22% YoY to INR2,272m, led by a pickup in both Recruitment (20% YoY) and 99acres.com (31% YoY), from 6% YoY growth seen in 2Q. EBITDA margin expanded 940bp YoY to 34.7%, a beat of 20bp. On a YoY basis, with most expenses flattish, INFOE has been able to ramp-up on advertising spend (+39% YoY). Adj. PAT grew 49% YoY to INR703m, below our estimates, due to lower other income.
• Back on the growth trajectory: Over the last few quarters, growth has fallen in Recruitment due to softness in IT Services, and in 99acres due to uncertainty around RERA. Although IT hiring continues to be subdued, a meaningful pick-up was seen in other sectors; even the Gulf business saw growth. At the same time, with the uncertainty factor around RERA waning, a gradual revival is expected in the real estate business. Effectively, INFOE’s performance trajectory has been thrown back to the levels before being impacted by the pain points.
• Zomato sees another round of funding: INFOE divested its 6.66% stake in Zomato to Ant Financial (an affiliate of Alibaba), out of its total holding of 44.74%. The divestment values Zomato at USD760m, but other transactions in the same deal value the company at >USD1b, a tad more than the previous round, which valued it at USD910m. Post the dilution (20%) in Zomato’s equity, INFOE will end up holding 30.91% in Zomato, making INFOE’s holding value INR22.4b (INR184 per share).