NEW DELHI: Job creation and demand for housing are closely linked to economic growth.
And for India, which is headed for an 11-year low GDP growth of 5 per cent in FY20, neither a sharp recovery in jobs nor a housing sector rebound is in sight.This may not be good news for the stock of this online classified company, which delivered a solid 58 per cent return in last one year.
Analysts said while the companys fundamentals remain solid, the recent rally has left little room for upside on the stock in the short term.The stock is Info Edge.The companys two major businesses verticals, Naukri.com and 99acres, cater to jobs and housing markets.We remain positive on Info Edge as the core businesses have shown resilience even in a tough business environment.
This phase of slow economic growth will weigh on the companys performance, but the fundamentals continue to be strong, said JM Financial, which has a target of Rs 2,600 on the stock.ICICIdirect has a price target of Rs 2,630 for the stock, Motilal Oswal Securities Rs 2,210 and Kotak Institutional Equities Rs 2,130.On Wednesday, the scrip traded at Rs 2,532, down 0.54 per cent.The scrip has surged 58 per cent in last one year against a 13 per cent rise in the Sensex, making it the third best performer in the BSE100 pack after Bajaj Finance and HDFC Life Insurance.
The stock has rallied 200 per cent in last three years, four times of Sensexs 48 pe cent return, and 1,000 per cent rally over the past decade.Info Edge Managing Director and CEO Hitesh Oberoi agrees things have slowed down for the company in last few months.It is not as if companies have built up a lot of capacity.
We are still not expecting companies to lay off people.
But things are slow on the jobs front for sure.
In real estate, things have been slow for last 7-8 years.
It is just that we were growing because revenue was moving from offline media to online.
We were benefitting because of that secular trend, he told ET NOW.The company also runs matrimony classifieds via Jeevansathi, and education classifieds via Shiksha.
Oberoi said even if the economic slowdown stays for one or two quarters, it is not going to impact its business much.
Initially the slowdown was restricted to a few sectors like telecom, real estate and infrastructure.
But over time, it has spread to other sectors like banking and financial services, insurance and other services.
Lately, we have also picked up some signs of distress in the startup space.
Some storm clouds are gathering on the horizon.
I hope they get clear over the next couple of months, he said.Info Edge said the ongoing slowdown in the economy has been gradual and things have been slowing down over the past few quarters.
Oberoi said it might take another year before things settle down in the real estate space.
The overall economic slowdown will impact billings growth of Naukri, which should also be visible in declining deferred revenue growth.
We expect a 16.7 per cent billing growth in the recruitment business for FY19-22E (vs 19.7 per cent growth in FY19) and margins in the business are likely to decline by 99 bps to 53.7 per cent by FY22F, JM Financial said.For 99acres, the brokerage expects billing growth to moderate from 31.6 per cent in FY19 to 20 per cent for the period FY19-22E, even as margins may inch upwards to 18 per cent by FY22.For December quarter, the company is expected to report 15-17 per cent YoY growth in sales.