With the Change of Guard at the Centre and the Finance Minister clearly speaking that they are going to favour the Industry, Web based Recruitment Platform – Naukri (Info Edge) is clearly the Hottest Internet Stock in India. It is the leader in two of its key segments, viz. online recruitment (~65% market share) & online property (~40%), which together contribute 90% of the topline. It has an attractive business model that results in strong return ratios, and benefits from rising smartphone and internet penetration.
Info Edge generates 75% of its revenues from online recruitment and 15% from property (purchase/sale and rental). Both segments are leveraged to the economy. Early signs of this are visible in the Naukri Job Speak Index, which is an indicator of hiring activity. This is also reflected in recruitment segment growth – which accelerated to 14%yoy in 4Q14 (4%yoy in 4Q13).
Service tax has been introduced to include online & mobile advertising. This would include banner ads on Naukri and 99Acres sites. While this is likely to have some impact, the expected pickup in the economy should help dampen the impact. In addition, the revised tax rules would have a negative impact on treasury income.
The Equity market Which Discounts Future Earnings has already given a Thumbs Up to Info Edge with the stock appreciating 129.8% in the last 12 months.