MOSL: QUESS CORP (Buy)-Growth story on track-Profit boosted by tax incentives
​Quess Corp: Growth story on track; Profit boosted by tax incentives
(QUESS IN, Mkt Cap USD1.9b, CMP INR873, TP INR1040, 19% Upside, Buy)
- Strong revenue momentum; PAT surges on tax benefits: QUESS’ 25.2% YoY growth to INR12.7b was 4% ahead of our estimate; organic growth was 16% YoY (excl. Comtel). EBITDA margin shrunk 20bp YoY to 5.2% (est. of 5.4%). Margins expanded in all segments barring Industrial amid ongoing realignment of business. PAT at INR1.4b was much higher than our estimate of INR329m, led by the 80JJAA benefits.
- Revenue traction strong across-the-board, only GTS growth acquisitive: Strong YoY growth was driven uniformly across business segments, with growth ranging from 17-40% YoY. GTS was the only segment with contribution from an acquisition (Comtel). Excluding this, growth in the segment was in high-single-digits. While growth in overseas acquisitions within GTS is expected to be relatively low, its Indian IT staffing business is facing the impact of sluggish activity in IT Services. Integration of Manipal and Terrier is expected to boost revenue growth in 2H.
- Acquired 70% stake in Vedang Cellular Services: QUESS announced the acquisition of Vedang Cellular Services, a top-five player in Telecom Network Optimization. The acquisition complements its existing capabilities of O&M. The acquisition will add ~2pp to revenues, but is accretive to QUESS’ margins to the tune of 10bp. QUESS also formed a JV with Trimax to create an information, communication and technology infrastructure as part of a smart city project in Ahmedabad.
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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