Buy Teamlease Services; target of Rs 3300: HDFC Securities

HDFC Securities' research report on Teamlease Services

Teamlease reported strong revenue growth for 3QFY19 but missed on margins. Revenue stood at Rs 11.72bn up 7.5% QoQ vs our est. of Rs 11.40bn. Growth was led by Core staffing (90% of rev, 8.6 QoQ) offset by HR Services (3% of rev, -16.8% QoQ). Specialised staffing (7% of rev) grew 4.6% QoQ led by IT staffing offset by soft Evolve (Telecom staffing). EBITDA margin was down 11bps QoQ to 2.1% (vs. our est. of 2.3%) led by lower margin in Evolve and HR services. Core staffing margins expanded 20bps QoQ to 2.1% led higher associate/core ratio (+8.1% QoQ).

Outlook

We expect revenue/EBITDA/PAT to grow at 21/30/26% CAGR over FY18-21E. Maintain BUY with a TP of Rs 3,300 based on 40x Dec-20E EPS.

For all recommendations report, click here

Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

Read More First Published on Feb 7, 2019 03:12 pm