ICICI Securities re-initiates coverage on Info Edge with BUY reco, sees 29% upside | Mint
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Business News/ Markets / Stock Markets/  ICICI Securities re-initiates coverage on Info Edge with BUY reco, sees 29% upside
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ICICI Securities re-initiates coverage on Info Edge with BUY reco, sees 29% upside

Brokerage house ICICI Securities has re-initiated coverage on the stock with a buy rating. This is because, with improvements in the global macro outlook and positive trends in IT hiring, the stock is expected to re-rate.

Brokerage house ICICI Securities has re-initiated coverage on the stock with a buy rating. This is because, with improvements in the global macro outlook and positive trends in IT hiring, the stock is expected to re-rate.Premium
Brokerage house ICICI Securities has re-initiated coverage on the stock with a buy rating. This is because, with improvements in the global macro outlook and positive trends in IT hiring, the stock is expected to re-rate.

After an around 35 percent decline from its all-time high in the last 2 years due to concerns about IT hiring and global economic uncertainties, brokerage house ICICI Securities has re-initiated coverage on the stock with a buy rating. This is because, with improvements in the global macro outlook and positive trends in IT hiring, the stock is expected to re-rate.

In addition, the real estate vertical is showing signs of profitability improvement; in our view, this vertical could start contributing materially to valuations from FY25. Also, the current stock price doesn’t reflect the sharp improvement in the stock price of the publicly listed investee companies such as Zomato and PB Fintech, noted the brokerage.

"At CMP we also think that risk-reward is heavily skewed (2.8:1) to the upside, which gives us valuation comfort. We therefore re-initiate with a BUY rating and a TP of INR 6,050, based on a SOTP valuation framework," recommended the brokerage. This target implies an upside potential of over 29 percent.

Read here: Angel One share price spikes to 52-week high on upbeat monthly business update 

The stock has risen a little over 16 percent in the last 1 year and 22.5 percent in 2023 YTD, giving positive returns in 7 of the 12 months so far. It has gained 3 percent in December so far after a 13 percent jump in November. However, it was in the red in the 3 months prior to that between August and October, down 11 percent in that period.

The stock hit its all-time high of 7,465.40 on October 19, 2021. To date, it has shed over 37 percent from its peak. Meanwhile, the stock hit its record high of 4,984.50 in August this year. Currently trading at 4682.20, the stock has advanced over 41 percent from its 52-week low of 3,310.00, hit in March 2023.

The brokerage noted that Naukri's 'JobSpeak' data suggests a sequential improvement in IT hiring trends, indicating a potential turnaround. The report anticipates a rebound in Info Edge's recruitment vertical revenue growth, driven by robust non-IT hiring in sectors like BFSI, real estate, and insurance, particularly in smaller towns.

Read here: JTL Industries share price: Axis Securities sees 30% upside after 30% YTD rally

Additionally, it pointed out that the long-term value drivers for Info Edge include the integration of talent management and skill development platforms, sustained investments in pre-revenue companies, and a focus on AI and ML capabilities in response to automation trends in HR.

The real estate vertical, represented by 99acres.com, has also shown consistent YoY growth, and the report predicts it could contribute significantly to valuations by FY25 if there is no sudden increase in competitive intensity.

Other businesses, such as matchmaking and Shiksha's counselling vertical for foreign education, as well, are experiencing growth, contributing to Info Edge's overall positive outlook, added ICICI.

Read here: Nifty 50 likely to touch 23,200 by end of 2024: ICICI Securities

The brokerage's risk-reward analysis suggests a favorable ratio (2.8:1) with a base case price target of 6,050. The bull case envisions a potential re-rating with a target of 7,500, while the bear case foresees a de-rating to 3,500. Risks include a sustained IT hiring slowdown, increased competition in recruitment or real estate, and a markdown in the valuation of investments, it cautioned.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decision.

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Published: 06 Dec 2023, 01:08 PM IST
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