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SBICap Securities
Firstsource Solutions (Buy)
CMP: ₹40.10
Target: ₹52
Firstsource Solutions (FSL) is a leading global provider of customised business process management (BPM) services to the healthcare, telecom and media and banking, financial services and insurance (BFSI). The company has over 100 global clients including 21 Fortune 500 and 9 FTSE 100 companies. After a difficult F10-12 period, the company has shown a resolute recovery over F13-F14 aided by a fresh lease of life from their new owners. We believe, the company can a) catapult itself to cover lost ground; b) set it on an elevated revenue growth path from 2HF15e onwards; c) flag down an improvement in margins; and d) recompense it with superior free cash flows (FCFs). All this while FSL would shrink its debt pile making a strong investment case in its favour. Key risk: Impairment of goodwill from past acquisitions that exceeds networth, could impede valuation uptick.
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