MOSL: QUESS CORP (Buy)-An encouraging comeback in Staffing
Quess Corp: An encouraging comeback in Staffing
(QUESS IN, Mkt Cap USD2.5b, CMP INR1160, TP INR1350, 16% Upside, Buy)
- Strong revenue momentum: Quess Corp's revenue grew 53% YoY to INR18.9b, higher than our estimate, led by a pick-up in organic growth, primarily in the People & Services (P&S) business. P&S growth stood at 38% YoY, recovering sharply from a low of 6% in 4QFY17. Beyond 30% YoY organic growth, incremental revenue was contributed by TBSS, Greenpiece, Vedang and Monster.
- Margins stable despite accretive acquisitions: EBITDA margin expanded 10bp YoY to 5.7%. While margin expanded in IFM and Industrials on a YoY basis, there was a contraction in both P&S and GTS. Moreover, Monster is currently loss-making at the EBITDA level. In the near term, growth is expected to be driven by P&S, which is a low-margin business, thereby keeping overall operating margins under check.
- Higher amortization: While the operating performance was not materially different from expectations, there was a sharp increase in amortization relating to customer-related intangible assets arising out of the recent acquisitions, leading to a 16% miss on PAT to INR758m (+127% YoY). Continuation of elevated amortization has also led us to revise down our earnings, despite the slight increase in revenue expectations. The company continues expecting >20% organic growth and a gradual increase in margins toward its target of 8%.
Quess Corp Limited is engaged in the business of temporary staffing services, executive search, recruitment services, housekeeping and facility management services, including engineering services, food services and skill development. The Company's segments include People & Services (P&S), Global Technology Services (GTS), Integrated Facilities Management (IFM) and Industrial Asset Management (IAM). Its P&S segment provides specialized service offerings in search, recruitment and recruitment process outsourcing, general staffing, training and skill development, payroll and compliance and retail solutions. Its GTS segment focuses on three areas, including information technology (IT) staff augmentation, solution and products. Its IFM segment offers facility management services, including soft services, hard services, food and hospitality and pest control. Its IAM segment provides plant asset management and it offers solutions in industrial operations and maintenance and managed services.
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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