Stock In Action: Info Edge Ltd

Movement of the Day

Analysis    

1. Naukri stock is poised for a potential breakout as it forms a Cup and Handle pattern on the daily chart. 
2. The momentum indicator, RSI (relative strength index), has confirmed the buy signal with a positive crossover.
3. Strong Momentum: Price above short, medium and long term moving averages

Probable Rationale behind the surge

Job Market Resilience

1. Despite a fall in average packages, Info Edge founder Sanjeev Bikhchandani notes that there are enough jobs for graduates from top institutes like IITs.
2. The company's job platforms, including Naukri.com, showcase resilience amid challenges in the job market.

AI Impact on Job Market

Bikhchandani expresses a positive outlook on AI, expecting it to create more jobs, albeit different ones. AI deployment is widespread across sectors, with both startups and traditional companies embracing it.

Company's Diversified Portfolio   

1. Info Edge owns diverse platforms, including Naukri.com, Shiksha.com, Jeevansathi.com, and 99acres.com.
2. Diversification helps the company navigate varying market conditions, contributing to its overall stability and growth.

Debt Management and Financial Strength   

1. The company's recent financials indicate a balanced approach to debt. With ₹40.3b in net cash, Info Edge demonstrates a healthy financial position.
2. Strong free cash flow of ₹5.6b (116% of EBIT) showcases the ability to manage debt safely.

Strategic Investments

Info Edge strategic investments, such as the recent Rs. 10 crore investment in Zwayam Digital, demonstrate a commitment to innovation and staying competitive in the recruitment solutions space.

Resilience in Funding Environment

While acknowledging a more discerning investor landscape, Info Edge believes there is no funding winter for good companies. The company's growth and financial health attract favorable investor sentiment.

Optimism in Job Market   

1. Insights from Pawan Goyal (Chief Business Officer at Naukri.com) and Sunil Chemmankotil (CEO of Teamlease Digital) indicate optimism in hiring intentions, particularly in the digital and technology talent pool.
2. Larger corporations, especially in the digital sector, show a strong inclination to hire, contributing to positive market sentiment.

Market Confidence in Future Growth  

1. Despite uncertainties in the IT sector and economic cycles, Info Edge remains optimistic about future growth.
2. The company's confidence is reflected in its strategic plans for revenue growth in key platforms like Naukri and 99Acres.

Growth Trajectory Presented by the Graphs

Financial Highlights:

Q2 Standalone Financials:

1. Revenues: Up by 11.5% YoY
2. Billings: Grew by 4.8% YoY
3. Operating Profit: Increased by 26.8% YoY
4. Profit Before Tax: Grew by 24.7% YoY
5. Cash from Operations: Increased by 13.9% YoY
6. Deferred Sales Revenue: Grew by 11.3% YoY

Cash Flow from Operation increasing along with net profit and same tangent almost this mean that company cash balance is in healthy situation.

Recruitment Solutions:

Naukri India:    

1. Revenue Growth: 7.7% YoY
2. Billings: Steady
3. Non-IT Hiring: Moderate growth, softness in tech hiring
4. Investments: In platforms like Job Hai, Ambition box, and areas like Data Science and ML

Real Estate Segment:    

1. Growth Momentum: Increased property prices, robust end-user demand
2. Billings: Grew by 22% YoY
3. Revenue: Grew by 25.2% YoY
4. Focus: Improving data quality, reducing spam on 99Acres platform

Shiksha Education Business   

1. Billings: Grew by 3.7% YoY
2. Revenue: Grew by 15.9% YoY

Jeevansathi Matrimony Business    

1. Billings: Grew by 16.7% YoY
2. Revenue: Grew by 8.6% YoY

Performance Expectations  

1. Anticipating better performance in the second half
2. Uncertainty in IT sector recovery, impact on recruitment business
3. Focus on attrition backfilling and potential hiring increase if IT demand improves

Naukri India Billing   

1. Q2 Billing: Rs. 370.6 crores, including IIM Jobs
2. Further discussion needed on Naukri India billing trend offline

Impact on Recruitment Business   

1. Significant impact on recruitment firms, down 60-70%
2. IT company efficiency rates decreased, leading to downgrades and reduced platform usage
3. Cost management, focus on investing in ML and AI capabilities

Company Initiatives    

1. Ongoing developments and integrations on Naukri platform
2. Partnerships with Coding Ninjas, Ambition Box, and JobHai
3. Payout ratio determined based on cash requirements, deferred revenue, and future expenses
4. Dividend policy: 15-40% of adjusted PAT, possible special dividends in certain situations

Future Plans    

1. Company targets 20%+ revenue growth in Naukri and 99Acres
2. No plans to monetize stakes in Zomato and Policy Bazaar due to growth potential.