MOSL: TEAMLEASE (Buy)-Expect a strong business recovery in FY22
TEAMLEASE: Expect a strong business recovery in FY22
(TEAM IN, Mkt Cap USD0.9b, CMP INR3757, TP INR4200, 12% Upside, Buy)
- TEAM’s operating performance was a beat on our estimates, with total revenue increasing 2.7% QoQ. Revenue growth was led by 17%/22% QoQ growth in Specialized Staffing/Other HR Services, offset by a 1% growth in the General Staffing business. Margin in 1QFY22 inched up by 20bp QoQ to 2.1%, led by strong growth in the Specialized Staffing business and partial reversal in provisions in Other HR Services. It reported an adjusted PAT of INR243m, implying a PAT margin (in line) of 1.8%.
- The management remains optimistic about a recovery in long term growth. We expect an impact on revenue growth in FY22, due to lockdowns induced by the second COVID wave, to be much more manageable than FY21. As a result, discount reversals, new logo additions, and strong growth in certain key industries should aid 25% revenue growth in the General Staffing business.
- Increased manpower demand and higher margin replacements in the IT Staffing business should result in strong growth in Specialized Staffing in FY22. An expected reversal in provisions in Other HR Services and increasing proportion of Specialized Staffing should aid a 40bp margin improvement by FY23E from FY21 levels. This, in turn, should result in an adjusted PAT CAGR of 42% over FY21-23E.
- Over the medium term, as both the Central and state governments look forward to liberalize and formalize the labor market, TEAM should be among the biggest direct beneficiaries.
- We have increased our estimates by 7%/4% to factor in higher margin for FY22E/FY23E. Our TP of INR4,200/share implies 42x FY23E EPS. We reiterate our Buy rating.
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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