Prabhudas Lilladher
TeamLease Services
(Accumulate)
CMP: ₹2,173.50
Target: ₹2,450
TeamLease is the leader in flexi staffing business in India and competes neck-to-neck with Quess Corp. TeamLease’s associate count in general staffing stands at 1.71 lakh as on Q3FY18 (v/s Quess’ general staffing headcount at about 1.5 lakh).
Led by market share gains in favour of organised players, we expect TeamLease to deliver 16/36/22 per cent Revenues/EBITDA/PAT CAGR over FY17-FY20E. We estimate EBITDA margins at 1.8/2.1/2.3 per cent for FY18/FY19/FY20E.
Productivity improvement (Associate/Core employee ratio) and improving mix of business would drive margins. Margin improvement over FY18-FY20E would be the key driver for earnings trajectory. Our EPS estimates are at ₹42/55/70 share for FY18/FY19/FY20E. Owing to higher share of business from general staffing, TeamLease’s business remains asset-light.
Debtors (including unbilled revenue) for TeamLease stand at 28 days for FY17 (v/s 73 days for Quess Corp and 68 days for SIS India). Hence, despite lower margins (v/s Quess and SIS), TeamLease has a similar ROE profile as its peers owing to lower WC cycle. We value TeamLease at 35x FY20E EPS (v/s 31x Sep 19E EPS earlier). Our TP has been increased by 30 per cent to ₹2450/share led by P/E upgrade.
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.