Quess Corp Ltd. share price target

Quess reported Q3FY18 sales of Rs 15.8 bn, up 48% YoY (adjusted for retrospective consolidation of MIS). Organic growth was strong at 30% YoY. Q3 results reflect consolidation of TBSS and Vedang Cellular. EBITDA margin expanded ~14 bps YoY to 5.7%. PAT at Rs 700 mn, up 107%

QUESS' 48.5% YoY revenue growth to INR15.8b was a beat to our estimate, driven by a pick-up in organic growth and integration of TBSS (which we had assumed for the subsequent quarter). While there have been several acquisitions over the last few quarters, we reckon organic growth in the quarter would be ~25% v/s ~20% in the previous quarter. A pick-up was also seen in the People & Services business,with growth of 25% YoY v/s 8% YoY in the year-ago period. EBITDA margin at 5.7%expanded by 10bp YoY. While margins were stable in P&S and the integration of higher-margin Manipal Integrated Services boosted profitability in Integrated Facilities Management, there was a YoY decline seen in Global Technology Solutions (-50bp) and Industrials (-200bp). A turn around in Industrials and further integration of accretive acquisitions would, however, lead to expansion, going forward. PAT at INR690m was up105% YoY, beating estimates because of a lower ETR (80JJAA).

We met the management of Quess Corp to understand its business model & future prospects. Incorporated in 2007, Quess Corp is India's leading integrated business services provider and among industry leaders in each of the key business services it operates in. It operates across business segments of people & services (P&S;) (53.6% to revenues in Q2FY18), global technology solutions (GTS) (30.6% to revenues), integrated facility management (IFM) (~10% to revenues) & industrials (IAM) (~6% to revenues). In the last five years, topline has grown at a...

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....

Quess concluded FY17 with gross sales of Rs 41 bn, driven by strong organic growth of 21% YoY. EBITDA margin expanded ~100 bps YoY to 5.7%. PAT at Rs 1.13 bn, up 40% YoY. Positive FCF of Rs 330 mn or 30% of PAT should allay investor concerns.

Revenue increased by 9.3% to Rs. 1122.09 Cr in Q4FY17 when compared to the previous quarter.

BUY Quess Corp Ltd at CMP Rs.671 and add on dips to Rs. 595 - 671 for the Targets Rs. 757 & Rs. 840

Quess Corp Ltd is one of India?s leading integrated business services providers focused on emerging as the preferred partner for handling end-to-end business functions of its clients

Quess Corp Limited - QUESS is one of India's leading business service providers handling end-to-end business functions for clients. As of February 2016, it had over 117,000 associate employees i.e. employees placed with clients and has provided employment to more than 120,000 associates. Quess has 1,300 clients (20 Fortune 500 clients), 47 offices across 26 cities and 3,400 core employees across India, North America, Middle East and South East Asia. Quess Corp aims to raise | 400 crore through a fresh issue of shares (at a price band of | 310-317 per share).At the IPO price band of | 310-317, the stock is available at a multiple of 45x-46.1x FY16 EPS at the lower/upper band, respectively.

Leading integrated business services provider in diversified business segments, industries and geographies: The company is a leading integrated business services provider in India providing comprehensive business solutions to a wide range of industries, including recruitment, temporary staffing, technology staffing, IT products and solutions, skill development, payroll, compliance management, integrated facility management and industrial asset management services. The company is the largest IT staff augmentation provider and one of the largest general staffing companies in India. In addition, the Company is among the leading industries asset management service...