Internet Companies

02 Feb

Margin pressure due to the increased marketing spending – Info Edge

Update on the Indian Equity Market:

On Wednesday, NIFTY closed in the green at 17,780 (+1.2%). Among the sectoral indices, PSU BANK (+3.4%), PRIVATE BANK (+2.3%), and BANK (+2.1) were the top gainers. There were no sectorial losers for the day. BAJAJFINSV (+5.0%), INDUSINDBK (+5.0%), and HCLTECH (+3.5%) were the top gainers. TECHM (-1.4%), ULTRACEMCO (-1%), and BRITANNIA (-0.9%) were among the top losers.

Excerpts from an interview of Mr. Chintan Thakkar, Wholetime Director and CFO at Info Edge with CNBC TV18 dated 31st January 2022:

  • The real way to look at the numbers is to look at the billing as well as cash EBITDA. The revenue is coming from the billings that happened in the 2QFY22, the billings are almost collected, and it’s an all-cash collection.
  • The overall margins are impacted due to an increase in spending on marketing and advertising expenses. The company is investing in its platforms, Jeevansathi, and in 99 acres. In 3QFY22, the Company’s EBITDA margin and PBT were impacted due to the increased spending in marketing and advertisement expenses in Jeevansathi and 99 acres.
  • The biggest growth driver for the company is recruitment solutions. There it has not increased its marketing spend in absolute numbers and the increase is marginal.
  • 3QFY22 was a strong quarter from a margins standpoint, particularly from the recruitment side. The strong momentum started from 3QFY21 has continued to do well. The increase in momentum is with the building up in the recruitment business and the company expects upside trend over there.
  • The overall paid listing has gone up on 99 acres. Increasing paid listing rather than the free listing is a part of the company’s overall strategy .
  • Info Edge started reinvesting in the real estate segment which was affected in FY21 due to the pandemic and the company expects the uptrend in the real estate business and has increased its spending as compared to last year.
  • On startup investment he said, the startup ecosystem is very vibrant and Info Edge also invests in the startups ecosystem as the company knows how the mechanism works there.
  • Info Edge continues to innovate and improve and is also investing in their products for the future growth of the company.
  • The company is focused on efficient growth on the top line as well as on the margins front. Other than that, the company invests in some of the startups and takes stake over there for the future growth of the company which is part of their overall strategy. The Company is balancing between current growth as well as the future growth of the company.
  • The company is seeing continued momentum and the company has not seen any major impact of omicron on the business and expects the 4QFY22 to also be a good quarter.

Asset Multiplier comments:

  • We believe that as the economic activities recover, the real estate sector will grow at a significant rate as well the robust hiring activities would support the revenue growth and positive operating leverage should support margins in the near term.
  • We expect the company’s investments in the startups to scale up in the near term and start contributing to the company’s valuation.

Consensus Estimate: (Source: TIKR website)

  • The closing price of Info Edge was ₹ 5,114/- as of 2-February-2022.  It traded at 143x/129x/125x the consensus Earnings per share estimate of ₹ 35.8/39.6 /40.9/- for FY22E/FY23E/FY24E respectively.
  • The consensus average target price is ₹ 5,648/- which implies a PE multiple of 138x on FY24E EPS of 40.9/-.

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

By Internet Companies, IT 0 Comments Read more...
27 Sep

Growth of the Indian gaming market to come in the next 4-5 years – Nazara Tech

Update on the Indian Equity Market:

On Monday, NIFTY closed flat at 17,855. The top gainers in NIFTY50 were MARUTI (+6.4%), M&M (+4.3%), and TATAMOTORS (+4.1%). The top losers were HCLTECH (-4.4%), TECHM (-3.3%), and WIPRO(-3.2%).

The top gaining sectors were AUTO (+3.2%), REALTY (+3.0%), and MEDIA (+1.6%), while the top sectoral losers were IT (-2.9%), HEALTHCARE (-1.3%), and PHARMA (-0.9%).  

Growth of the Indian gaming market to come in the next 4-5 years – Nazara Tech

Edited excerpts of an interview with Mr. Manish Agarwal, Chief Executive Officer, Nazara Technologies (Nazara) with ETNow on 23rd September 2021:

  • Nazara categorizes its consumers based on the age group and all their acquisitions fit in these cohorts. One is 2-12-year-old young kids, 14-25-year-old male sports fans, and then above 25 gamers.
  • Nazara is present in emerging markets like India, South Asia, South Africa, and the Middle East which are seeing a strong tailwind across gaming and adjacencies to gaming.
  • The company’s last acquisition Publishme allows the company to build gaming IPs in the Middle East.
  • Having an on-the-ground understanding of what the consumer needs and how it would pan out in terms of retention engagement, consumer acquisition, and community building are important aspects for the company to succeed.
  • Nazara three years back took a call that gaming is a talent-driven business and that talent is passionate about what they create and you need to work with that talent to grow those companies.
  • Nazara’s telco business which is 15 years old, contributes around 13-14% to the company’s overall portfolio and its acquired IPs are in their growing phase like kiddopia, Nodwins, Sportskeeda, and the World Cricket Championship.
  • The company’s strategy has been to build all the friends of Nazara as a concept and then continue to build value with those founders at subsidiary levels.
  • Gaming as a secular trend was in a very advanced stage even before COVID due to two key reasons i.e launch of Jio and UPI transactions.
  • Pre-pandemic, the company was growing around 48-50% YoY. The combination of acquisition and organic growth helped the company to grow ~87% and continues to see the same momentum of growth in different businesses.
  • India is still 2-4 years old in e-gaming and esports. India’s gaming is still a very small market and is limited to mobile as an access device. The growth of this market is expected to come in the next 3-5 years.
  • It is always important as an industry to look into the markets which are far ahead (seven-eight years ahead) and then work with stakeholders today to ensure creating and evangelising the benefits of gaming.
  • Looking at the risk of gaming, it is predominantly limited to skill-based real money gaming where people are waging their money to win a large part of the money. The non-real money gaming part which is free to play mobile gaming, e-sports, or gamified learning does not fall into this bracket.
  • Clarity regarding the difference between games of chance and games of skill will help to bring clarity to the policy.
  • The company expects National E-sport Championship in the coming time to create a positive perception about gaming. This will take time and can only change through large ticket items like Olympics plus constant engagements with the stakeholders.

Asset Multiplier Comments

  • We believe rising gaming culture, evolving E-sports, improvement in digital payment and tech infrastructure, favorable macro-economic, and demographic drivers in India provide an opportunity for the growth of the company.
  • Nazara has created the entire network through selective acquisitions. This will help to explore the gaming sector boom in India.

 

Consensus Estimate (Source: market screener websites)

  •  The closing price of Nazara Technologies was ₹ 2,280/- as of 27-Sep-21. It traded at 146x/90x/61x the consensus EPS estimate of ₹ 14.7/23.6/35 for FY22E/ FY23E/FY24E respectively.
  • The consensus target price of ₹ 2,060/- implies a PE multiple of 59x on FY24E EPS of ₹ 35/-.

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

 

By Internet Companies 0 Comments Read more...