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JM Financial
Info Edge (India) (Hold)
Target: ₹2,960
CMP: ₹3,460.90
We upgraded Info Edge (India) to buy on April 9 following a sharp correction in its stock price during the early days of Covid-19 crisis. Over the next six months, the stock touched its all time highs (with 1-year fwd PER of standalone business jumping to nearly 90x versus nearly 60x prior to the crisis) as the initial Covid fears subsided.
Info Edge’s recovery momentum improved and market started speculating on the valuations of its key investee companies/ potential names for M&A’s.
We followed this with a rating downgrade to HOLD, expressing our belief that howsoever strong the fundamentals, the excitement in the stock price was not justified, keeping in mind the near-medium term challenges (Aug’20). However, the stock continued to trade at elevated levels, encouraging us to study if there were any other avenues from where the company could derive incremental value.
We zeroed down on three such factors: intrinsic value of the 23 active investee companies (ex-Zomato and PolicyBazaar); the potential value generation if Info Edge succeeds in consolidating the top 3 players in the matrimony space; and the potential value unlocking for Info Edge shareholders if PolicyBazaar was to successfully go public at a valuation of nearly $3.5 billion
This leads to a change in our SOTP-based per share FV to ₹2,960 versus ₹2,870 earlier.
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