MOSL: TEAMLEASE SERVICES (Buy)-Headcount softness – illusive not reflective-Turning our heads to profitability growth to gauge underlying strength
TEAMLEASE SERVICES: Headcount softness – illusive not reflective; Turning our heads to profitability growth to gauge underlying strength
(TEAM IN, Mkt Cap USD0.7b, CMP INR2939, TP INR3500, 19% Upside, Buy)
- Over the last year, TEAM's stock has appreciated in value by 125%, contrary to what was believed to be a soft year for the General Staffing business.
- However, considering the reporting differences between the General Staffing business and the Trainee business, we believe that EBITDA growth would be a better reflection of business strength.
- The large pass-through component in revenue also turns out to be optically deceiving; deviations in revenue growth abate the consequent impact on EBITDA growth.
- In FY18, for 19% YoY revenue growth, EBITDA grew by 86% YoY - 65% of which was contributed by the General Staffing business. This suggests that the key drivers of profitability (realization and operating leverage) are at play, and would only intensify once growth trajectory in General Staffing returns to historical levels.
- We are encouraged by the margin execution and profitability diversification achieved over the last year. Thus, future prospects for the company appear promising.
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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