MOSL: TEAMLEASE SERVICES (Buy)-Volume growth, through large clients-at a small cost
TeamLease Services: Volume growth, through large clients; at a small cost
(TEAM IN, Mkt Cap USD0.6b, CMP INR2548, TP INR3300, 30% Upside, Buy)
Strong revenue beat; but margins lower in non-general staffing
- TEAM's 3QFY19 Revenue at INR11.7b grew by 28% YoY (exp. of +22% YoY); EBITDA at INR245m grew by 37% YoY (exp. of +44% YoY); PAT at INR255m grew by 39% YoY (exp. of +46% YoY)
- General staffing associates grew by 7,548 QoQ, +5.2% QoQ and 16.6% YoY to 152,693, above our estimate of 5,000 additions QoQ. Specialized staffing saw in uptick of 52 associates QoQ to 6,117 (+3.5% YoY), and in line with our estimate of 6,100.
- EBITDA margin at 2.1% declined 10bp sequentially, below our estimate of 2.3%. However, EBITDA margin in General staffing came in line with our estimate of 2.1%, whereas the disappointment was led by specialized staffing, where EBITDA margin was 5.6% (-170bp QoQ) v/s estimate of 7.9% and Other HR services, where EBITDA margin plummeted from 10.6% to 1% (estimate of 4.5%)
- PAT at INR255m (+1.3% QoQ, +38.6% YoY) was 5.4% below expectations, led by operational miss.
Game for large deals, at lower PAPM
- TEAM's Per-associate-per-month (PAPM) realization is down to INR710 during the quarter from ~INR750 in the previous year. This has been a function of large deal bids on a fixed mark-up basis (INR560). The approach is vindicated by the profit performance within the segment - which was in line despite the aggression, as the company's Associate-to-core employee ratio inched up from 241 to 260. TEAM will be open to lower PAPM only for large volume opportunities.
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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