Result Update: Q3 FY 11 - breport.myiris.combreport.myiris.com/firstcall/INFEDGND_20110128.pdfThe...
Transcript of Result Update: Q3 FY 11 - breport.myiris.combreport.myiris.com/firstcall/INFEDGND_20110128.pdfThe...
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Info Edge (India) Ltd Result Update: Q3 FY 11
C.M.P: Rs.546.00 Target Price: Rs.628.00 Date: 28 Jan 2011
BUY
Years Net sales EBITDA Net Profit EPS P/E
FY 10 2336.71 948.37 569.27 20.86 26.18
FY 11E 2947.30 1232.82 779.33 14.28 38.25
FY 12E 3359.92 1416.28 893.95 16.38 33.34
Stock Data:
Sector: IT Enabled Services
Face Value Rs. 10.00
52 wk. High/Low (Rs.) 773.00/392.50
Volume (2 wk. Avg.) 12210
BSE Code 532777
Market Cap (Rs.In mn) 29806.69
Share Holding Pattern
1 Year Comparative Graph
INFO EDGE LTD BSE SENSEX
SYNOPSIS
• Info Edge (India) is a leading provider
of various portals related to online
recruitment, matrimonial, real estate
and education classifieds and related
services in India.
• Info Edge India Ltd reported a rise of
27.50% in sales (standalone) for the
quarter ended Dec 2010.
• Info Edge (India) Ltd proposes to invest
upto Rs. 47 million in DC Foodiebay
Online Services Pvt. Ltd.
• Info Edge (India) Ltd issues 1:1 bonus
shares.
• Applect is now subsidiary of Info Edge
in which they have invested an
additional Rs.50 million.
• Net Sales and PAT of the company are
expected to grow at a CAGR of 11%
and 14% over 2009 to 2012E
respectively.
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Peer Group Comparison
Name of the company CMP(Rs.) Market
Cap.(Rs.Mn.) EPS(Rs.) P/E(x) P/Bv(x) Dividend (%)
Info Edge India 546.00 29806.69 12.88 42.70 7.91 7.50
Subex 64.70 421.75 17.86 3.62 1.18 -
Coral Hub 2.53 61.22 0.52 4.87 0.22 6.00
Redington India 71.05 2807.38 2.90 24.50 4.15 50
Investment Highlights
Q3 FY11 Results Update
Info Edge India Ltd reported a rise of 27.50% in sales (standalone) for the quarter
ended December 2010.During the quarter the company disclosed a profit of
Rs.219.24 million against Rs.156.44 million in the same quarter previous year. The
total operating income of the company Rs. 817.80 million against Rs.660.58
million of the same quarter of previous year, a rise of 23.80% over the prior year
period
Quarterly Results - standalone (Rs in mn)
As At Dec-10 Dec-09 %change
Net sales 750.77 588.86 27.50
PAT 219.24 156.44 40.14
Basic EPS 4.02 5.73 (29.93)
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Net Sales & PAT Growth
During the quarter, Net sales rose by 27.50% to Rs.750.77 million from Rs.588.86
million in the same quarter last year and the Total Profit for the quarter ended
December 2010 was Rs.219.24 million grew by 40.14% from Rs.156.44 million
compared to same quarter last year.
Performance of verticals during quarter
� The recruitment business comprising of Naukri, Naukrigulf, Quadrangle,
Resume services and First Naukri accounted for about 83% of their
operating top lines in Q3 as opposed to 84% in Q3 last year. The Q3 top-line
in recruitment grew by 23.7% to 54.8 crores. Naukri top line grew by
approximately 22.5%, Candidate Services grew by about 13% and
Quadrangle grew at about 70%. EBITDA margins in recruitment were at
41.9% versus 39% in Q3 last year. In Naukri the EBITDA margin were at
44.8% up from 41.8% a year ago.
� The other business verticals line Jeevansathi and 99acres and Shiksha
account for the remaining 17% versus 16% last year.
� The other verticals in Q3 net sales grew 28.6% to 11 crores year-on-year.
99acres grew by 80%, Jeevansathi was flat. Shiksha grew 100% on a smaller
base.
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Investment in DC Foodiebay Online Services Pvt. Ltd.
Info Edge (India) Ltd proposes to invest upto Rs. 47 million in DC Foodiebay
Online Services Pvt. Ltd., an online food guide and restaurant directory
business is the fourth investment as a part of Info Edge strategy to invest in
internet startups which has its presence in Delhi NCR, Mumbai, Pune, Banglore
and Kolkata.
Issue of bonus shares
Info Edge (India) has issued bonus shares in the ratio of 1:1, i.e. one new equity
share for every one equity share held, to the existing equity shareholders of the
company, as on the record date, as may be fixed.
Further, the company would shortly take steps to obtain the approval of the
shareholders to increase the authorized share capital from the present Rs 40
crore to Rs 60 crore.
Investment in External Companies
Applect was regarded as a subsidiary in FY10. From this year onwards
eTechAces too would qualify as a subsidiary. In Applect they have invested an
additional Rs.50 million in Q1. The eTechAces site policybazaar.com is
continuing to gain interaction; revenues are primarily from lead generation.
Company Profile
Info Edge (India) incorporated in 1995, owns one of the leading job portals naukri.com.
The company is a leading provider of various portals related to online recruitment,
matrimonial, real estate and education classifieds and related services in India.
Company has a network of 67 offices spread across in 41 cities in India. Company also
operates internationally through 2 offices in Dubai, 1 in Bahrain and 1 in Riyadh.
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These international offices are engaged in business of sales, marketing and payment
collection activities of company’s business division.
The company has employee strength of 1,798 people. Info Edge (India) owns four
subsidiaries namely Naukri Internet Services, Jeevansathi Internet Services, Info Edge
(India) Mauritius and Allcheckdeals India.
Business Recruitment
This division of company is involved in providing recruitment through portals namely
naukri.com, firstnaukri.com, naukrigulf.com, brijj.com and Quadrangle-an executive
search agency. AS on FY 2007-08, more than 10,000 resumes were added daily on
Naukri.com, with a client base of 32,500 corporate clients and 87,000 job listings and
an extensive database of over 13 million resumes.
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Real Estate
Under this company operates 99acres.com. The company has pan India listing of
properties for sale, purchase and rent spanning across more than 25 cities. This portal
offers an online medium to connect brokers, dealers and interested buyers or sellers.
Matrimonial
Company operates jeevansathi.com which is amongst leading matrimonial websites in
the country. As on FY 2007-08 more than 2.36 million profiles registered on the
website.
Education
Company operates Shiksha.com that offers information for over 70,000 colleges,
courses, scholarships and admission notifications.
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SWOT ANALYSIS
Strengths
Info Edge is a leader in the online space in India.
High margins compared with competitors.
Strong management.
Increase in market share.
Weaknesses
Expenditure is being increased.
A Loss is observed in Jeevansathi.com.
Opportunities
Younger population in India and the steady increase in internet penetration
continue to support.
Increase in attrition.
Threats
Economic conditions
Competition in the market.
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Financials Results
12 Months Ended Profit & Loss Account (Standalone)
Value(Rs.in.mn) FY09A FY10A FY11E FY12E
Description
12m 12m 12m 12m
Net Sales 2451.66 2336.71 2947.30 3359.92
Other Income 286.30 305.66 267.55 320.94
Total Income 2737.96 2642.37 3214.85 3680.86
Expenditure -1799.32 -1694.00 -1982.03 -2264.59
Operating Profit 938.64 948.37 1232.82 1416.28
Interest -0.35 -0.54 -0.82 -0.95
Gross profit 938.29 947.83 1232.00 1415.33
Depreciation -71.10 -61.07 -68.25 -75.08
Profit Before Tax 867.19 886.76 1163.75 1340.25
Tax -270.33 -317.49 -384.42 -446.30
Net Profit 596.86 569.27 779.33 893.95
Equity capital 272.95 272.95 545.91 545.91
Reserves 2966.18 3520.71 4300.04 5193.99
Face Value 10.00 10.00 10.00 10.00
Total No. of Shares 27.30 27.30 54.59 54.59
EPS 21.87 20.86 14.28 16.38
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Quarterly Ended Profit & Loss Account (Standalone)
Value(Rs.in.mn) Jun-10A Sep-10A Dec-10A Mar-11E
Description 3m 3m 3m 3m
Net sales 658.82 711.86 750.77 825.85
Other income 65.55 65.84 67.03 69.13
Total Income 724.37 777.70 817.80 894.98
Expenditure -454.48 -498.16 -476.07 -553.32
Operating profit 269.89 279.54 341.73 341.66
Interest -0.17 -0.23 -0.20 -0.22
Gross profit 269.72 279.31 341.53 341.44
Depreciation -13.77 -14.03 -19.83 -20.62
Profit Before Tax 255.95 265.28 321.70 320.82
Tax -83.26 -86.41 -102.46 -112.29
Net Profit 172.69 178.87 219.24 208.53
Equity capital 272.95 545.91 545.91 545.91
Face Value 10.00 10.00 10.00 10.00
EPS 6.33 3.28 4.02 3.82
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Key Ratio
Particulars FY09 A FY10 A FY11 E FY12 E
EBIDTA % 38.29% 40.59% 41.83% 42.15%
PAT % 24.35% 24.36% 26.44% 26.61%
P/E ratio (x) 24.97 26.18 38.25 33.34
ROE - % 18.43% 15.01% 16.08% 15.57%
ROCE (%) 26.76% 23.35% 24.00% 23.34%
EV/EBITDA (x) 15.88 15.71 24.18 21.05
Debt-Equity Ratio 0.00 0.00 0.00 0.00
Book Value (Rs.) 118.67 138.99 88.77 105.14
P/BV 4.60 3.93 6.15 5.19
Charts:
1. Net Sales & PAT
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Outlook and Conclusion
At the current market price of Rs.546.00, the stock is trading at 38.25 x FY11E
and 33.34 x FY12E respectively.
Price to Book Value of the stock is expected to be at 6.15 x and 5.19 x
respectively for FY11E and FY12E.
Due to increase in equity capital the EPS is decreased, the EPS of the stock
is expected to be at Rs.14.28 and Rs.16.38 for FY11E and FY12E respectively.
Net Sales and PAT of the company are expected to grow at a CAGR of 11% and
14% over 2009 to 2012E respectively.
On the basis of EV/EBITDA, the stock trades at 24.18 x for FY11E and 21.05 x
for FY12E.
Info Edge India Ltd reported a rise of 27.50% in sales (standalone) for the
quarter ended December 2010.
Info Edge (India) Ltd proposes to invest upto Rs. 47 million in DC Foodiebay
Online Services Pvt. Ltd.
Info Edge (India) Ltd issued 1:1 bonus shares.
We expect that the company will keep its growth story in the coming quarters
also. We recommend ‘BUY’ in this particular scrip with a target price of
Rs.628.00 for Medium to Long term investment.
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Industry Overview
IT enabled Services (ITeS)
Sector structure
The National Association of Software and Service Companies (NASSCOM) is the apex
body for software services in India. According to its recently released publication-
Strategic Review 2010, the IT-BPO sector's revenue as a proportion of the country's
gross domestic product (GDP) has grown from 1.2 per cent in FY 1998 to an estimated
6.1 per cent in FY 2010. Further, NASSCOM predicts that the Indian IT-BPO revenues
may touch US$ 225 billion by 2020.
As per the Strategic Review 2010, the BPO sector continues to the fastest growing
segment of the industry and is expected to reach US$ 12.4 billion in FY 2010, growing
at 6 per cent.
As per the annual report 2009-10 by the Department of Information Technology (DIT),
the IT-BPO industry is expected to reach US$ 73.1 billion in 2009-10 as compared to
US$ 69.4 billion in 2008-09, witnessing a growth of over 5 per cent.
Further, as per DIT, the ITeS-BPO is being seen as the fastest growing segment within
the Indian IT-BPO sector and is predicted to reach export revenues of about US$ 12.4
billion in 2009-10 as compared to US$ 11.7 billion in 2008-09, growing at 6 per cent.
The domestic BPO revenue is expected to touch US$ 2.29 billion in 2009-10 from US$
1.93 billion in 2008-09, registering a growth of 18.6 per cent, according to the DIT.
Moving up the value-chain
ITeS, which started with basic data entry tasks over a decade ago, is witnessing an
expansion in its scope of services. It now offers services such as knowledge process
outsourcing (KPO), legal process outsourcing (LPO), games process outsourcing (GPO)
and design outsourcing, among others.
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The Indian BPO sector has not only added scale in the last nine years, but has also
matured significantly in terms of scope of service offerings, buyer segments served and
service delivery models. Apart from achieving maturity in the horizontal segment,
providers are increasingly developing vertical/domain specialisation to capture greater
value.
According to the DIT, among the verticals serviced by India's IT/ITES-BPO industry
those that account for the largest share of revenue are banking, financial services and
insurance (BFSI)-41 per cent, Hi-Tech/Telecom (20 per cent), manufacturing (17 per
cent), retail (8 per cent), with smaller contributions coming from media, publishing
and entertainment, construction and utilities, healthcare and airlines and
transportation. Important industry verticals being serviced by the BPO segment are
insurance, retail banking, travel and hospitality, auto manufacturing, telecom and
pharmaceuticals. Horizontals such as Customer Interaction and Support (CIS),
Finance and Accounting (F&A) and Human Resource Management (HRM) are
important areas in the BPO segment.
• The Indian animation market is estimated to touch US$ 1.02 billion by 2014, to
grow at a CAGR of 18.7 per cent on the back of increase in consumption of
animated content and growth of 3D formats, according to a report by an
industry body and KPMG published in March 2010.
• According to the same report, the Indian gaming industry that grew by 22 per
cent in 2009 is expected to reach US$ 703.14 million by 2014, to grow at a
CAGR of 32 per cent.
• As per a report, 'Globalization of Engineering Services', published by NASSCOM
and Booz Allen Hamilton, India may garner 20 to 25 per cent of the global
market for offshored engineering services by 2010. Further, the country may
capture 25 to 30 per cent of projected US$ 150 billion to US$ 225 billion
market, i.e. around US$ 50 billion by 2020.
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• According to a report by consultancy firm ValueNote, the legal process
outsourcing (LPO) revenues in India is estimated to reach US$ 1.1 billion in
2014 from US$ 146 million in 2006.
Advantage India
According to AT Kearney's 'Global Services Location Index 2009', a ranking of the top
50 most attractive offshoring destinations, India continues to be the most preferred
destination for companies looking to offshore their IT and back-office functions. India
has constantly held the number one position since 2004, when the rankings started.
As per the report, India has remained at the forefront of the outsourcing industry and
actually has become an enabler for industry growth through expansion of Indian
offshoring firms into other countries.
According to the Department of Information Technology, India accounts for around 28
per cent of IT and BPO talent among 28 low-cost countries. It has a rapidly growing
urban infrastructure fostering several IT centres in the country. Offshore service
centres are spawning in the country due to operational excellence with low delivery
cost, quality leadership and a conducive business environment. Favourable policy
interventions, enabling infrastructure and augmenting a wide skill base from the
government has further enhanced India's brand image.
Deals
• Mahindra Satyam BPO has entered into an agreement with Johannesburg-
based contact centre and BPO Direct Channel Holding Ltd that has multiple
delivery centres in Africa.
• Hinduja Global Solutions, a BPO company and part of the Hinduja Group, has
bought Careline Services, a UK-based customer relationship management
company.
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• Enterprises Ltd, an engineering services and technology solutions provider, has
signed a long-term agreement with Seawell AS of Norway to provide engineering
support services.
• Avantha Group has acquired US-based Pyramid Healthcare Solutions in a deal
with an estimated value of US$ 20 million.
• IT major Wipro Technologies has entered into a multi-year outsourcing
engagement with British American Tobacco, to help the company improve
effectiveness and efficiency of application support services for its global
business operations.
• Aditya Birla Minacs, the information technology business solutions firm, has
acquired UK-based Compass BPO, finance and accounting (F&A) services
provider.
• Tata Consultancy Services has entered into a global engineering services
partnership with power systems company Rolls-Royce.
Exports
According to DIT, ITeS-BPO exports is expected to reach US$ 12.4 billion in 2009-10
from US$ 11.7 billion in 2008-09, registering a year-on-year (Y-o-Y) growth of 6 per
cent.
Government Initiative
• Setting up of Software Technology Parks of India (STPIs) in 1991 for promotion
of software exports from the country - there are currently 51 STPI centres where
apart from exemption from customs duty available for capital goods there are
also exemptions from service tax, excise duty, and rebate for payment of
Central Sales Tax. But the most important incentive available is 100 per cent
exemption from Income Tax of export profits, which has been extended till 31st
March 2011.
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• Government is also setting up Information Technology Investment Regions
(ITIRs). These regions would be endowed with excellent infrastructure and
would reap the benefits of co-siting, networking and greater efficiency through
use of common infrastructure and support services.
• The government has recently relaxed employment visa norms for the IT and
ITeS sectors, allowing companies in these sectors to employ foreign nationals as
per their requirements, effectively removing the ceiling of 20 such employees
per company. Companies would need to provide a declaration that the skilled
worker has been hired for working in an IT or ITeS company or a software
technology park of India or special economic zone dedicated to IT or an IT unit
in a multi-product zone, while the foreign worker being sponsored would have
to give a declaration to the effect that his annual salary is in excess of US$
25,000 per annum.
________________ ____ _________________________ Disclaimer:
This document prepared by our research analysts does not constitute an offer or solicitation
for the purchase or sale of any financial instrument or as an official confirmation of any
transaction. The information contained herein is from publicly available data or other
sources believed to be reliable but do not represent that it is accurate or complete and it
should not be relied on as such. Firstcall India Equity Advisors Pvt. Ltd. or any of it’s
affiliates shall not be in any way responsible for any loss or damage that may arise to any
person from any inadvertent error in the information contained in this report. This document
is provide for assistance only and is not intended to be and must not alone be taken as the
basis for an investment decision.
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