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This article is more than 1 year old.

With 55% returns this year, this Internet company stock has surpassed Nifty IT gains despite dull Q2 earnings

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On a YTD basis, Info Edge's shares rose 55 percent to current market levels as compared to Nifty IT's 37 percent.

With 55% returns this year, this Internet company stock has surpassed Nifty IT gains despite dull Q2 earnings
One of the India's oldest internet companies Info Edge suffered losses during the COVID-19 pandemic in its various business units. However, surprisingly, the stock has outperformed the big IT names and the Nifty IT index on a year-to-date (YTD) basis. The stock has been hitting its all-time high level since four days.
On a YTD basis, Info Edge's shares rose 55 percent to current market levels as compared to Nifty IT's 37 percent. In the last six trading session, the stock has climbed over 15 percent.
Info Edge runs recruitment services (Naukri.com), real estate platform (99acres.com), matrimony site (Jeevansathi,com), food delivery service (Zomato) and education service (Shiksha.com) along with other businesses.
Dull Q2 earnings but positive management commentary:
Due to the lockdown, the company suffered a 19 percent decline in its net revenue year-on-year in the second quarter. The operating EBITDA also came down by 48 percent YoY to Rs 51.6 crore.
Naukri.com is the cash cow for Info Edge but saw a heavy losses during the pandemic as majority of the companies froze hiring. Hitesh Oberoi, CEO of the company gave out positive comments and said that October has started off well.
"Seeing recruiters coming back on the platform but the activity is down 15-20 percent from last year's level," he added.
He further said that there is a surge in inquiries on 99acres while Jeevansathi saw about 15-20 percent growth this quarter.
Zomato fuelling stock's rally: Most investors are betting highly on the increase in the value of the investments in Zomato and PolicyBazaar. The optimism in the stock is majorly due to Zomato as it's revenue run-rate is now near pre-COVID levels led by the rise in food orders.
Attractive return ratios: The company's high free cash flow ratio stands at 28 percent with 5-year return-on-equity (RoE) of 10.4 percent, showed data of Stockopedia.
It further highlighted that it's high return on capital employed is at 19.1 percent, which measures the company's growth and profits.
Brokerages' View: Motilal Oswal feels that multi-dimensional growth may be expected across its core businesses in the medium-to-long term.
"We expect long-term growth trends to play out at its operating entities, whose margins continue to inch up on high operating leverage," said the brokerage. However, it has also warned that consolidated losses could be curtailed over time given its inclination for profitability in investee companies.
Nomura in its note said that delivery volumes have recovered to pre-pandemic levels and appear on track to hit operating profitability in the coming quarters.
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