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Info Edge Q3 results: Wayward?


Info Edge (Naukri) is out with Q3 results. It has made 8.1 cr in profits on a revenue of 38 cr. in the quarter. They made revenues and profits of 84 cr. and 13.3 cr. in FY 2006. In the nine months of FY 2007, they have already made 99.9 cr. of revenues, and 16.9 cr. profits.

But the EPS calculation wrong. I don’t know whether I have missed anything out, but they have 2.7295 cr. shares, and they made 8.158 cr. of profit. Their results shows EPS as Rs. 3.3 per share for the quarter, but if you divide 8.158 by 2.7295 you get a figure of Rs. 2.99. They’ve reported an EPS of 3.3.

I had noted in my IPO analysis that they had not released Q2 results. And they have still not released it to the stock exchanges. But from this nine month results we can see the difference – Q2 saw revenues of 32.62 cr. and profits of 3.56 cr. (EPS of Rs. 1.3) That means, sequentially, profits and EPS was as follows:

Q1: 5.22 cr. (EPS post dilution: Rs.1.91)
Q2: 3.56 cr. (Rs. 1.3)
Q3: 8.1 cr. (Rs. 2.99)

This is a little wonky – an up quarter, a down quarter and then back up. The second quarter is not a bad quarter in India for their business- I hope there is no manipulation and that they’ve not taken away some of the Q2 numbers and put it in Q3 just to impress the market.

Total diluted EPS is Rs. 6.2 (wrongly reported at 7.42) in the first nine months. If they make the same profit in the last quarter, their EPS will move to about Rs. 9.2 for the year. Current market price is Rs. 742, that means the company is valued at a P/E of 80, which is higher than that of most other software companies listed in India.

From their release it’s possible to also discern results of Q4 2006 – which seems to have yielded 24 cr. of revenue but only 2 cr. of profit last year. This means it’s not been a strong quarter last year, and the next quarter may yield lesser revenues and profits than this one. So looking forward P/E may be even higher than 80.

Overall, I think this company is overvalued because a) it’s the only internet product player and b) there is very little floating stock available. In about a year, some of the stock that is locked in will come into the market, and that will provide some much needed liquidity and perhaps some less absurd valuations.

I’m not impressed yet, and my call is to stay away. I’d pick this stock at a value of less than Rs. 300 only, though the next few quarters will tell us what the real growth is.

Note: I recommended a “do not buy” to this IPO, which was oversubscribed 12 times at the retail level and 55 times totally. It as priced at Rs. 320, and the current price is now more than double the IPO price. I must concede that I found it overpriced even at Rs. 320, but obviously the market has lapped it up. I still find it overvalued tremendously. Whatever it is, my valuation is way below market, so note my advice knowing that I have underestimated the share price earlier.


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