Info Edge (India) – Play on operating leverage

Q3FY10 results review - ICICI Securities

Info Edge's Q3FY10 EBITDA margin rose 480bps to 30.5% with recovery in recruitment demand. Thus, despite reducing overall ad spends 11.6% QoQ, recruitment revenues grew 8.7% QoQ led by 7% QoQ improved realisation – EBITDA margin rose 600bps QoQ to ~44% in recruitment. We expect demand recovery in recruitment to continue and Info Edge with its leadership in online recruitment will have better pricing power (i.e. reduction in earlier discounts). Also, losses in non-recruitment are expected to come down. We believe Info Edge has a unique business model with high operating leverage, negative working capital, minimal capex and strong cashflow generation. With cash kitty at +Rs3.5bn, Info Edge is uniquely placed to take advantage of the recovery. With better margin performance, we raise FY10E-11E EBITDA ~5% and EPS ~3%. We expect EBITDA margin to rise to 31.3% by FY12E from 27.8% in FY10E. We introduce FY12 estimates and raise DCF target price to Rs960 from Rs800.

Source : Equity Bulls

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