The company added ~7000 employees in NETAP, which means there are green shoots in manufacturing and auto. TLS expects improved demand from these two sectors, going forward. In addition, the company is seeing improved traction in consumer goods, e-commerce, telecom and some financials. This, coupled with addition of 24 new logos in the quarter, addition of large ticket customer and TLS' commentary of exiting FY21E headcount at higher levels than FY20, reversal of discounts keeps us positive on general staffing revenue growth (11% CAGR in FY20-23E). In specialised...

The General Staffing headcount remained flat on a sequential basis and was better than our expectation. Impressively, realizations remained stable despite the pressure on markups in the industry. Furthermore, FTE...

TeamLease reported revenue/EBIT/PAT growth of -9%/-4%/-9% YoY v/s our General Staffing headcount decline (10% QoQ) in 1QFY21 came in lower than initially expected (1620% QoQ). Even as the management is cautiously optimistic on prospects of growth recovery, we expect a good rebound in General Staffing headcount over the next two quarters. Our DCF-based TP of INR2,700 implies 32x FY22E Overall revenue was below our estimates as decline in Other HR Services In General Staffing, headcount declined just 10% QoQ (v/s ~15% for Quess) and revenue ~14% QoQ (v/s 22% for Quess). Across segments, margin expansion during the quarter was Realizations in General Staffing remained stable despite the markup pressure in the industry. Over the medium term, as both the central and state governments look forward to liberalizing and formalizing the labor markets, TeamLease should be among Stable realizations and aggressive cost rationalization should enable the company to report robust margin expansion in FY21E.

Despite challenging times, the company gained market share in general staffing business (added 78 accounts) in Q1FY21, helping TLS to register 14.5% fall in volumes vs. expected 18-20% dip. Going forward, we expect an economic recovery and market share gains to boost the topline. This coupled with traction in NETAP due to some improvement in manufacturing & auto will further give impetus to general staffing revenues. Also, we expect a revival in demand from BFSI, logistic, healthcare and FMCG to lead to healthy growth in general staffing. Hence, we assume 10.5% CAGR in FY2022E in general staffing. In specialised staffing, we expect revenues to...

Our TP Rs 1,980 is based on 30x (5Y average 1-y forward P/E of ~35x) FY22E EPS. Maintain BUY. Teamlease delivered inline revenue performance but the margin was below estimate. The impact of Covid-19 is on the Core staffing segment (~90% of rev) while the Specialised staffing segment (~8% of rev) is relatively stable. The impact of lockdown will be visible in 1QFY21E with ~16-18% QoQ decline in core associate headcount. Teamlease has ~40% exposure to high impacted verticals like Infra, Manufacturing, ENU, Auto, and Retail. The exposure to less impacted verticals like BFSI, Agri, Chemicals, Essential Retail, Pharma, Hospitality, and Telecom is at ~60%.

Aggressive cost rationalization measures, full-year consolidation of a higher margin entity (IMSI), and shift in mix toward apprentices provides strong headroom for margin expansion during FY21E (50bp/40bp v/s For FY21-22E, we upgrade our EPS estimate by 15% and expect ~31% PAT CAGR. However, margins in General Staffing and Specialized Staffing segments specialized staffing and other HR services (INR62m), (b) provision write-back from the previous quarters in other HR services (INR45m), (c) MAT credit write-off (INR496m), as the company is moving to the new tax regime, and (d) 80JJAA driven quarterly tax aberrations. Recovery in some verticals like logistics and manufacturing is expected to take scope for further rationalization of ~300 employees, translating into cost savings In 4QFY20, TEAMs revenue/adj.

The spread of Covid-19 has led to lockdowns in many countries globally and could have adverse economic implications. In addition, the recent fall in crude prices could also have an adverse impact of fiscal health of oil producing countries. As a result, IT companies, which have considerable exposure to verticals such as oil, energy & utilities; banking & capital markets; manufacturing and travel & transport could see an adverse impact from the ongoing crisis. Companies like Wipro, Infosys in large cap and MindTree, NIIT Tech, Sonata software, Cyient, Accelya Solutions among...

30 January 2020 Robust organic revenue growth (+31% YoY) was almost entirely driven by general staffing. However, this has not translated into equally strong growth in EBITDA/PAT. Lower mark-ups in the recent contracts have been driving a secular decline in general staffing margins over the past few quarters. P/E multiples at a steep discount to Teamlease (57%), coupled with some of the recent positive developments, have led to a sharp re-rating (22%) over the past three months. Organic/overall revenue increased 31%/36% YoY, largely led by general staffing segment, while most other key segments remained modest at best Excluding the impact of Ind-AS 116 and the inorganic contribution from Allsec Technologies, EBITDA growth was weak at 5% YoY. Margin contraction within general staffing was the key overhang on overall margins. This could have been driven by lower mark-ups in large deals. Loss run-rate at Monster came down QoQ (EBITDA margin of -10% v/s -18% in 2Q).

We like company's low risk business model (non outcome based), focus on scaling core associates and diversified client base across sectors. There is scope for margin expansion through productivity benefits and better business mix. Teamlease's ability to grow ~15-20% organically, focus on driving productivity through automation, lower funding exposure, domestic focus and high management pedigree commands premium valuations vs. peers. We expect revenue/EBIT/PAT to grow at 19/21/17% CAGR over FY19-22E. Risks include adverse macros, discontinuation of Sec 80JJAA tax incentive and delay in tax refunds. We maintain BUY on Teamlease based better than expected revenue growth in 3QFY20. Growth in core business will continue based on higher open positions and recovery in NETAP. Margin expansion was lower than estimate but cost cutting initiatives, improving productivity and change in business mix will lead to margin expansion. Our TP Rs 3,444 is based on 40x (5Y average 1-y forward P/E of 35x) Dec-21E EPS.

NETAP addition to see better trajectory in coming quarters Revenues from general staffing (including NETAP) grew 6.8% QoQ (14.5% YoY) driven by a mix of associate growth (1.5% QoQ) and average realisation. Lower number at associate addition on a QoQ basis is due to weakness in addition in NETAP headcount (led by slowdown in manufacturing) and attrition in associates (in FMCG and retail) in December, which was usually a February phenomenon. As per the management, weakness in NETAP has bottomed out and would gradually see an...

The company's general staffing revenues increased at a lower-thanexpected rate at 16.6% YoY mainly led by mere increase of 5.4% YoY (average growth of 40% YoY in last five quarters) in NETAP headcount in this quarter. This was mainly on the back of weakness in manufacturing and auto segments. In the near term, any significant improvement in NETAP business is unlikely. However, continued growth in general staffing associate headcount (ex-NETAP) prompts us to believe the company could clock growth of 20.2% over FY19-21E in general staffing. This accompanied by acquisition of eCentric in IT staffing, led us to estimate 23.3% growth in...

We like company's low risk business model (non outcome based), focus on scaling core associates and diversified client base across sectors. There is scope for margin expansion through productivity benefits and better business mix. Teamlease's ability to grow ~20% organically, focus on driving productivity through automation, lower funding exposure, domestic exposure and high management pedigree commands premium valuations vs. peers. We expect revenue/EBIT/PAT to grow at 19/24/19% CAGR over FY19-22E. Risks include adverse macros, discontinuation of Sec 80JJAA tax incentive and delay in tax refunds. We maintain BUY on Teamlease despite slight miss on revenue and margin in 2QFY20. NETAP trainees addition was impacted due by core sector slowdown. However, general staffing (~75% of total associates) is on growth track and will have a strong 2HFY20. Our TP Rs 3,415 is based on 40x Sep-21E EPS.

2QFY20 revenue at INR12.7b grew 16.2% YoY (v/s est. 23.5%) while EBITDA at INR245m grew 2% YoY (v/s est. PAT at INR202m declined 20.1% YoY (v/s est. 10 November 2019 General staffing associates grew by 4,415 QoQ (14% YoY) to 165,029, below our est. Specialized staffing saw a decline of 309 associates QoQ to 6,549 (+8% YoY), below our est. The decline in specialized staffing headcount was led by reduction in Telecom sub-segment associates from ~3,700 to 3,500.Revenue from Other HR services declined 25% YoY due to planned reduction in exposure to government mandates.

Healthy demand pipeline to keep general staffing robust The company's general staffing revenues increased 23.4% YoY mainly led by associate addition of 7642 QoQ and 32678 YoY. This quarter saw a higher addition of medium and small clients, which led to an increase in mark up QoQ to | 730 per employee per month (PEPM) from | 714 in Q4FY19. The company has 12,000 open position in general staffing, which reflects that the company has good pipeline in this segment. This coupled with healthy traction from manufacturing consumer and BFSI prompt us believe that the...

Teamlease is witnessing steady demand across sectors. Rise in open positions (~12K vs. 8K) reflects robust demand while platforms like Freshersworld.com are helping to attract talent. We like company's low risk business model (non outcome based), focus on scaling Core+NETAP associates and diversified client base. There is scope for further margin expansion through productivity benefits and better business mix. Teamlease's ability to grow ~20% organically, focus on driving productivity through automation, lower funding exposure, domestic exposure and high management pedigree commands premium valuations vs. peers. We expect revenue/EBIT/PAT to grow at 21/27/23% CAGR over FY19-22E. Risks include adverse macros, discontinuation of Sec 80JJAA tax incentive and delay in collection of tax refunds (Rs 2.3bn). We maintain BUY on Teamlease based on in-line 1QFY20. Positives include (1) Acceleration in core staffing growth, (2) Improving core productivity and (3) Growth in mark-up. Our TP Rs 3,520 is based on 40x June 21E EPS.

EBIT and PAT were impacted by profitability in Other HR Services', where the company created a provision for INR60m due to delay in collections. These are expected to reverse in 2Q-3QFY20. Adjusted for the provision, TEAM's EBIT would have grown 32% to INR231m...

General staffing to drive overall revenue growth In FY19, overall revenues grew 22.7% YoY led by 19.2% growth in total associate headcount. Total associate headcount increased 34888 YoY to 2.16 lakh in FY19, of which entire addition came from general staffing business. General staffing is mainly a volume play business. Hence, it is expected to be a major driver of revenue growth. With the management indicating ~17-18% volume growth in FY20E, we expect general staffing &...

Teamlease is witnessing traction across BFSI, e-commerce and Manufacturing sectors. Portals like Schoolguru and Fresher's world are helping in talent acquisition. Macro tailwinds, such as (1) Labour reforms, (2) Focus on higher compliance, (3) Rising preference for organised staffing, and (4) Govt-driven skill development initiatives (NETAP) will drive ~20% CAGR in organised flexi-staffing. We like company's low risk business model (non outcome based), lower dependence on funding model, focus on scaling Core+NETAP associates, scope for margin expansion through productivity benefits and better business mix. The stock trades at a premium valuation of 35x FY21E, which will remain considering the structural growth story, focus on organic growth and domestic exposure. We expect revenue/EBITDA/PAT to grow at 20/26/24% CAGR over FY19-21E. Risks include macro slowdown, drop in mark-up and competition from unorganised players. We maintain BUY on Teamlease based on in-line 4QFY19. Core staffing segment (~91% of rev) growth drivers are on track and margin performance is encouraging. Our TP of Rs 3,500 is based on 40x FY21E EPS.

General Staffing Associates grew by 1,402 QoQ (+1% QoQ; 16% YoY) to 154,095 (below our est. of 4,000 additions QoQ). The miss was a function of pronounced 4Q seasonality. Specialized staffing saw a decline of 170 associates QoQ to 5,947 (below our est. of 6,424). EBITDA margin at 2.2% increased 10bp sequentially (above our est. of 2.1%). EBITDA margin had a broad-based improvement with General Staffing 20bp above our est. of 2.1%. Specialized staffing EBITDA margin was 6.2% (30bp beat to est. of 5.9%). This was despite softness in Telecom staffing, which...

Teamlease (TEAM) reported a tepid quarter with gross revenues declining by Change in Estimates | Target | Reco ~1% QoQ & specialized staffing and other HR service verticals pulled down overall performance. Specialized staffing growth in Q4FY19 was mild at 9.1%...