‘Hold’ Info Edge shares; target price raised to Rs 1,715 – Jefferies

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Published: March 26, 2019 2:00:46 AM

Info Edge management reiterated strong growth momentum across key businesses, as demonstrated by recent results.

The company sounded more guarded on margins.

The Info Edge management sounded optimistic on growth as it is witnessing a strong momentum across key businesses. In particular, it believes 99acres — real estate classified — is still in the early stages of a strong up-cycle. However, the company sounded more guarded on margins. Cash burn has risen sharply in Zomato and could remain elevated in Jeevansathi. We raise our price target but maintain our Hold, noting expensive valuation and inadequate disclosure on Zomato.

Info Edge management reiterated strong growth momentum across key businesses, as demonstrated by recent results. It sounded particularly optimistic on the prospects of 99acres with resale & rental markets already showing improvement but new home-related activity still facing challenges. Revenue growth for 99acres has consistently exceeded 30% for the past five quarters; such momentum was last seen in March 2015.

Commentary on margin was more guarded, however, with technology & product development costs and advertising & promotion expenses rising. While the latter could ease slightly in Q4 on seasonal factors, the management said marketing spend is likely to remain high in FY20E, with high cash burn set to continue at Jeevansathi. Revenue growth needs to be over 20% for margin to improve, according to management, though we note it has delivered margin improvement with much lower growth in the past.

The management admitted that lack of disclosures on Zomato is an issue for Info Edge shareholders but indicated that this is unlikely to change.

We raise our PT for Info Edge to Rs 1,715 to factor in the impact of the roll forward of our DCF as well as higher values for Zomato and Policybazaar based on recent fundraising and other developments.

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