Shares of Info Edge (India) Ltd. have returned four times the gains compared with the broader index and are trading close to a record.
The stock of the company that operates online classifieds, hiring, education and property listing portals surged 21 percent in the last three months compared with a gain of 4.5 percent in the NSE Nifty 500 Index, according to Bloomberg data. It trades at a premium of 79 times its FY19 price-to-earnings ratio compared with its two-year average of 36.
While about 70 percent analysts recommend a ‘Buy' on the stock, the Bloomberg consensus 12-month price target implies a downside of 1.3 percent.
Based on brokerage and management views, here's what investors need to keep in mind:
Likely Pressure On Margin
While advertising spends could slightly ease in the fourth quarter because of seasonal factors, it's expected to remain high in the upcoming financial year, according to a Jefferies note citing its interaction with the management. The revenue growth must remain over 20 percent to maintain its margin, it said.
In an emailed response to BloombergQuint, Chintan Thakkar, chief financial officer at Info Edge, said green shoots are visible in the real estate sector, so marketing spends in that area will increase. In other areas, marketing spends will be as per plans and the company will take a call on them from quarter to quarter, he said. The company has Rs 1,600-crore cash on its books which it aims to use for acquisitions noted BoA Securities
Key Takeaways From Other Businesses
Naukri.com
- Hiring in information technology—constituting 40 percent of recruitment revenue—has been rising, according to Jefferies.
- Gradual investments in technology, especially in recruitment management systems and advertisement, Jefferies said.
- Confident of cutting costs should growth exceed 20 percent, according to Citi and Motilal Oswal.
- Continuous ramp up in the segment to counter rivals such as IIM Jobs and LinkedIn, Motilal Oswal said.
99Acres
- Re-sale and rental markets are improving but new home related activities still face challenges, according to Jefferies.
- Revenue growth has consistently exceeded 30 percent for the past five quarters, it said.
Jeevansathi.com
- The online matrimony classifieds arm has been burning most money, according to BofA Securities.
- The company will spend more to curb operating losses over the next four to five quarters, it said.
- Jeevansathi ranks third in the online matrimony segment with 15 percent market share. It needs investments to hold its market share, BofA Securities said, adding the segment has reported 6.6 percent growth over the last three quarters.
PolicyBazaar
- PolicyBazaar's initial public offering is still sometime away, according to BofA Securities.
- Sees strong growth ahead in this segment, it said.
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