Info Edge's Naukri To Rebound? HSBC Sees Q1 As 'Cyclical Bottom', Upgrades To 'Buy' — Check New Target Price

HSBC upgraded Info Edge India's rating to 'buy' from 'hold', while holding the target price steady at Rs 1,670. This positive shift comes despite the company's weak first-quarter results, which saw low billings and weak margins. The brokerage views this quarter as a "cyclical bottom" for the company and believes that the business could now see improvement.

We believe low- to mid-teens long-term growth is still plausible for the core business, as valuations are reasonable for this growth, according to HSBC.

The analyst bets that with recovery in growth from non-IT segments, Naukri billings growth should return to double-digit in the upcoming quarters, as the slowdown in Naukri billings was broad-based and not just from IT. In their view, this weakness was due to heightened macro uncertainty and is cyclical.

HSBC's upgrade comes from the view that the concerns about Info Edge's growth are only temporary. The billing slowdown in its Naukri business is attributed to a broader macroeconomic slowdown and is therefore considered cyclical rather than a long-term issue.

They highlight that Info Edge is successfully diversifying its business portfolio. It notes that other platforms, such as 99acres, Jeevansathi, and newer ventures like Job Hai, IIMjobs, and Naukri Gulf, are all experiencing strong growth. They also note that 99acres and Jeevansathi businesses have now become profitable on a cash basis.

The brokerage notes that a low-to-mid teens long-term growth rate is a plausible expectation for the company's core business. HSBC believes that the current valuation is reasonable for this level of growth. The brokerage cites potential upside from Info Edge's investments in companies like Zomato.