by Vivek Ananth
If you track companies and their results closely, April and May have been a blur of Q4 results and earnings calls. Now we are on the cusp of a new earnings season for the June quarter of FY22. We look at some signals of what may be ahead for the hospital sector, and an internet business pioneer. We also take a look at promoters buying up company shares: is that always a good sign?
In this week’s Analyticks we check:
How an internet business pioneer has dealt with the pandemic
Catching the virus: Four hospital chains and their FY21 performance
Screener: Promoters buying shares in their company
Let’s dive in.
Info Edge’s core business picks up in Q4FY21
Nearly 15 months ago when the first wave of the Covid-19 pandemic hit, many stocks were available for cheap. Economic anxiety after all, is a value-seeking investor's best friend. At that time, Info Edge (India) - Naukri - lost a little more than one-third of its value at the time and touched a low of Rs 1,951.6.
Over the next 12 months Info Edge’s stock took off, more than tripling in value, and touched a lifetime high of Rs 5,880. The stock rode investor optimism till February 2021, shrugging off a loss-making FY20. But in a sign that it has probably climbed too high, the stock has been moving sideways since then. At a current trailing twelve month price-to-earnings multiple of around 45 times, the company looks pretty expensive. The stock is likely in contention for inclusion into the Nifty 50, according to Edelweiss Alternative Research.
Info Edge posted a consolidated profit in FY21 because of a Rs 1,434.2 crore exceptional gain, due to a fresh infusion of funds into its investee companies including Zomato and Policybazaar. This gain is notional and not a realised gain by Info Edge.
It is tempting to remove this gain from Info Edge’s profits and then reassess its performance, but Info Edge is an investing powerhouse, and its portfolio of startups a significant contributor to its valuation. Investors are valuing the company’s future prospects based on this investment portfolio as well. Info Edge positions itself as a prominent investor in rising young businesses and has set up an alternative investment fund with Temasek to scout for long-term bets. Currently, the company has around 19 companies in its investment portfolio.
This partly explains its elevated valuations. But let’s take a look at what is happening with its core business, jobs and real estate listings.
Naukri recovers and 99Acres' revenues improve in FY21
Info Edge’s job portal Naukri makes up the majority of its standalone revenues and nearly a third of its revenues from job listings comes from IT and IT enabled services (ITES) companies. So the dip in quarterly revenues of Naukri in FY21 was due to muted hiring in the first half of FY21. As hiring picked up in IT and ITES companies, quarterly revenues started rising. But Naukri still posted lower revenues in Q4FY21 at Rs 198.7 crore compared to Rs 230.6 crore in Q4FY20.
Real estate listing portal 99Acres was impacted by lockdowns as physical movement is a prerequisite to either renting or buying a house. Hence, revenues fell sequentially in the first two quarters of FY21. As the economy started opening up, revenues picked up. The number of paid listings on 99Acres remained over 7,20,000 for two consecutive quarters ending Q4FY21. But this momentum was interrupted when the second wave of the pandemic hit in April 2021. The company’s management says there was some recovery in this business in June 2021.
The 99Acres business posted an operating loss of Rs 22.2 crore in FY21 compared to positive earnings before interest, tax, depreciation and amortisation (EBITDA) of Rs 8.4 crore in FY20. Similarly, the matrimony business Jeevansathi also posted an operating loss of Rs 95.2 crore in FY21 compared to an operating loss of Rs 63.2 crore a year ago. The Shiksha.com education vertical did manage to eke out an EBITDA of Rs 4.1 crore in FY21, a more than three-fold rise over FY20.
The losses in 99Acres and Jeevansathi (the latter primarily due to increased investments to match the marketing spends by competitors) pulled down Info Edge’s standalone EBITDA margins in FY21.
Still looking for acquisitions and investment opportunities
Info Edge ended FY21 with Rs 3,592 crore worth of cash and cash equivalents, which doubled YoY due to a qualified institutional placement of shares in FY21 worth Rs 1,875 crore. The company intends to invest in its core business, including Jeevansathi and Shiksha. It will continue scouting for early stage businesses.
There is also a possible initial public offering of shares of Zomato that will earn the company up to Rs 750 crore, which will possibly push its cash reserves to above Rs 4,000 crore. For now, investors will hope that the company continues to post decent standalone profits so that it can pay out 15-40% of such profits as dividends, according to its stated dividend policy.
Hospital chains recover after a tumultuous first half of FY21
One would have expected hospital chains to do well during the current pandemic. But Covid19 came with an unfortunate twist for the hospital sector. The first half of FY21 saw India’s top four listed hospital chains by market capitalisation (Apollo Hospitals Enterprise, Max Healthcare, Fortis Healthcare and Narayana Hrudayalaya) struggle to eke out a profit.
Hospital chains in FY21 were impacted by the overwhelming focus on Covid-19 related treatments. Patients who needed non-Covid elective and non-elective procedures were lower in priority, and patients awaiting elective treatments postponed hospital visits and surgeries due to worries about getting infected in hospital environments.
This led to a fall in occupancy for most hospitals across India. Apollo Hospitals’ overall occupancy fell to 38% in Q1FY21 as Covid-19 took centre stage. Over the next few quarters occupancy slowly rose and the company ended the year with an occupancy of 63% in Q4FY21.
Similarly, Max Healthcare’s occupancy was 45.1% in Q1FY21, and slowly rose over the next few months to end at 74% in the March 2021 quarter. Narayana Hrudayalaya and Fortis Healthcare also witnessed a similar trend.
The rise in occupancy helped shore up revenues of these hospital chains in the second half of FY21. It will be interesting to see the occupancy levels of hospital chains under the second wave of the pandemic. If FY21 is anything to go by, occupancy levels likely dropped again in Q1FY22.
Investors who are eyeing the healthcare sector in these pandemic times might want to keep a close eye on the June 2021 quarter results. If Q1FY22 quarter follow the trend from Q1FY21, then every subsequent wave of the pandemic could wreak havoc with hospital chains’ profitability.
Screener: Promoters buying company shares
Promoters buying shares of their company can be a confidence booster for investors. It can also be a ploy by promoters to limit the fall in the stock’s price.
This screener throws up all insider and SAST trades over the past month, while the company’s stock price was falling during the same period.
This screener can be used to identify promoters buying shares in their company, over the past one month. There are three companies that saw a material increase in shareholding of promoters or promoter group entities. Promoter group entities of Adani Green Energy and Adani Ports & Special Economic Zone bought 1.17% stake and 0.31% stake, respectively via multiple trades even as rumors around a regulatory crackdown led to share prices falling for Adani Group stocks.
There is also an instance of State Bank of India-controlled SBI Life Insurance buying a 0.13% stake in SBI Cards and Payment Services in a single trade. State Bank of India is the promoter of both SBI Life Insurance and SBI Cards and Payments Services.
You can make your own screeners here.
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