Comments
Emkay Global
Firstsource Solutions (Buy)
Target: ₹125
CMP: ₹101.70
Firstsource Solutions (FSOL) is confident of delivering revenue growth in low to mid-teens over the next three years. It has accelerated investments into sales and account management and solution capabilities in the last 1.5 years, driving better client mining and new logos acquisition.
BFS, which accounts for over 50 per cent of FSOL's total revenue, led growth in 9M-FY21 with a strong performance in the mortgage business (>2x YoY). Rising interest rates in US may weigh on mortgage origination (refinancing mainly) growth; however, traction in UK retail & commercial banks, mortgage servicing, and collection would support growth, in our view.
After a sharp fall in Q1, CMT bounced back strongly in the last two quarters with a solid volume recovery and market share gain in the top client (back to growth in Q3; down 10 per cent in 9M). PatientMatters acquisition should augment recovery in healthcare from Q4-FY21.
We expect FSOL to deliver nearly 19 per cent earnings growth over FY20-23. We maintain Buy with a TP of ₹125 at 15x FY23E earnings, considering a sustainable improvement in the revenue growth trajectory with stable margins and strong cash generation.
Comments
COMMENT NOW
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.