MOSL: TEAMLEASE SERVICES (Buy)-Past the dent-back on the upward trajectory
TeamLease Services: Past the dent; back on the upward trajectory
(TEAM IN, Mkt Cap USD0.6b, CMP INR2285, TP INR2700, 18% Upside, Buy)
- Weak quarter in General Staffing, but expect revival going forward: Revenue for TeamLease (TEAM) grew 13% YoY to INR9.2b, 2pp below our estimate. This was on expected lines, as General Staffing business growth slowed down to 8% YoY v/s +19% in 1HFY18, due to [1] GST-related uncertainty, [2] insourcing by some customers and [3] higher base because of demonetization. However, a sharp uptick in headcount addition (+3k) toward end-3QFY18 (v/s 2k decline in 2Q) indicated a return of traction.
- Higher contribution from Specialized Staffing: With the integration of Evolve and Keystone this year, Specialized Staffing contributed 6.4% of revenue v/s 2.7% last year. Excluding incremental revenue from acquisitions, growth in Specialized Staffing stood at 24% YoY, an encouraging sign. Higher growth v/s General Staffing should continue feeding into margin accretion, as the business is currently exhibiting 10% EBITDA margin, 6% revenue contribution and 33% EBITDA share.
- Strong margins performance: Barring the impact of higher-profitability acquisitions, EBITDA margin in General Staffing (adjusted for one-time write-back of provisions of INR30m) was at 1.7% (+30bp YoY). Our thesis of margin uptick, led by higher realization (INR775 per person per month (pppm), +9% YoY) and scale-led benefits (associate/core employee ratio of 219 v/s 202 last year), has been playing out incredibly well. This drove EBITDA margin of 1.9% (10bp beat) in 3Q. PAT of INR184m grew 60% YoY, led by strong margin performance and 80JJAA benefits.
Teamlease Services Ltd. Teamlease Services Limited is an India-based company engaged in employment activities. The Company operates as a temporary staffing company and provides human resource services to various industries. Its segments include Staffing Operations, Recruitment Operations and Training Operations. Its services include Temporary Staffing or Temping, Recruitment Services, Regulatory Compliance Services, Retail Learning Solutions (RLS), Institutional Learning Solutions (ILS), Apprenticeship Program (NETAP), TeamLease Skills University and Payroll Processing. It works across industry verticals, including consumer durables, retail, telecom, chemical, e-commerce, pharmaceuticals and healthcare sectors. Its permanent recruitment business is supported by its Candidate Lifecycle System technology platform. It offers training programs in information technology (IT), finance and retail. Its institutional learning solutions business provides skill development services under various Government schemes.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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