Quess Corp Ltd. Absolute :ADD ), PT ( Good on margins but low...
Transcript of Quess Corp Ltd. Absolute :ADD ), PT ( Good on margins but low...
January 25, 2018 Analyst: Abhishek Shindadkar ([email protected], +91 9619 137 983, +91 22 4332 0634) Page 1 of 22
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Quess Corp Ltd. Absolute :ADD
Relative : Overweight
3QFY18 Result: Est. (), PT (), Rating () Regular Coverage 5% ATR in 14 months
Good on margins but low on revenue: Retain ADD Staffing Services
© 2018EquirusAll rights reserved
Rating Information
Price (Rs) 1,110
Target Price (Rs) 1,174
Target Date 31st Mar 19
Target Set On 24th Jan '18
Implied yrs of growth (DCF) 12
Fair Value (DCF) 419
Fair Value (DDM) 318
Ind Benchmark BSE IT
Model Portfolio Position NA
Stock Information
Market Cap (Rs Mn) 163,015
Free Float (%) 28.33 %
52 Wk H/L (Rs) 1198.9/630
Avg Daily Volume (1yr) 138,490
Avg Daily Value (Rs Mn) 118
Equity Cap (Rs Mn) 1,455
Face Value (Rs) 10
Bloomberg Code QUESS IN
Ownership Recent 3M 12M
Promoters 71.7 % -9.8 % -17.3 %
DII 4.5 % 2.1 % 2.2 %
FII 7.3 % 1.9 % 3.0 %
Public 16.6 % 5.8 % 12.0 %
Price % 1M 3M 12M
Absolute 1.5 % 26.6 % 54.5 %
Vs Industry 3.3 % 7.0 % 54.2 %
TeamLease -5.3 % 36.8 % 151.7 %
SIS 1.4 % 57.9 % -
Consolidated Quarterly EPS forecast
Rs/Share 1Q 2Q 3Q 4Q
EPS (17A) 1.7 2.1 2.3 1.9
EPS (18E) 2.2 10.2 4.7 6.4
Quess Crop’s (Quess) 3Q earnings were ahead on margins but missed our revenue
estimate. Variance relative to EE was largely due to Manipal contribution relative to
our estimates. That said, margin beat was encouraging while discussions suggest we
are good on FY18e estimates. Consequently, we continue to expect (1) a 31% revenue
CAGR over FY17-FY20E led by structural demand trends in general staffing, facilities
management (FM), industrials (IAM) businesses, and inorganic contribution, and (2) a
65% PAT CAGR over FY17-FY20E. Change in tax assumption leads to a modest increase
in FY19e EPS and in our DCF-based Mar’19 TP to Rs 1,174, which discounts our Mar’19
TTM EPS by 41x. Retain ADD. Healthy yoy growth but marginally below EE: Revenues grew 48% yoy to Rs.15,840
mn but were below EE of Rs. 17,128mn. Segregating further, People and services
(P&S) revenues grew 25% yoy to Rs. 7,355.7mn (Rs. 7,222 mn EE) and now contribute
46.5% of revenues while Global Technology Services (GTS, 30.3% contribution)
revenues grew 71% yoy to Rs 4803.2mn (EE: Rs. 4,298mn/53.1% yoy growth).
Integrated facility management (IFM) business revenues grew 86% yoy to Rs.
2,634.4mn along with 16.6% contribution, while Industrials revenues grew 83% yoy to
Rs. 1,046mn. Variance relative to EE was restricted to Manipal contribution. We are
maintaining our pre-3q estimates as discussion post 3Q suggests we are good on
estimates. EBIT up 33.2%/50% qoq/yoy, -4.1% below EE: Consolidated EBIT increased 50% yoy
while margins expanded 5bps yoy and 33bps qoq. Segmentally, P&S EBIT grew 26%
yoy along with ~4 bps yoy improvement in margins. GTS EBIT grew 60% yoy but
margins declined by 47bps. IFM EBIT grew 145% yoy along with 190bps improvement
in margins while industrial EBIT grew 18% yoy (EBITM declined ~200bps yoy to 3.7%).
Modest 3q beat helps retain our margin estimates. Announces Greenpiece Landscapes acquisition and leadership changes:
Greenpiece Landscapes (revenues of Rs 333mn, EBITDAM 9.8%) acquisition could
close before 4Q end and could add adjacency services to IFM business. Quess has
also announced leadership changes with existing CFO being elevated to the position
of CEO while Mr. Isaac would lead as the chairman of board and MD. PE/G (adjusted for one-time benefit) valuations continue to be reasonable:
Though valuations appear rich on the PE metric, QUESS trades at 0.8x PE/G based on
historical (FY12-17) PAT growth. Modelled 65% PAT growth over FY17-FY20E (driven
by revenue visibility) coupled with improving FCF and return ratios (RoE/RoIC:
~23%/29% in FY18E) could help sustain multiples.
Revised Estimates % Change over Prev.
FY18E FY19E FY18E FY19E
Sales (Rs mn) 62,790 81,325 0.0% 0.0%
EBITDA 3,763 5,290 0.0% 0.0%
EBIT 3,406 4,878 -1.0% 0.0%
Recurring PAT 3,444 4,145 0.0% 2.0%
EPS 23.7 28.5 0.0% 2.0%
Change in EPS due to one time tax benefit.
Consolidated Financials
Rs. Mn YE Mar FY17A FY18E FY19E FY20E
Sales 41,574 62,790 81,325 93,534
EBITDA 2,228 3,763 5,290 6,479
Depreciation 264 357 412 478
Interest Expense 465 669 629 591
Other Income 153 530 114 249
Reported PAT 1,133 3,444 4,145 5,093
Recurring PAT 1,133 3,432 4,145 5,093
Total Equity 8,362 20,305 24,450 29,543
Gross Debt 7,304 -105 -531 -733
Cash 4,596 14,635 16,282 18,963
Rs Per Share FY17A FY18E FY19E FY20E
Earnings 7.8 23.6 28.5 35.0
Book Value 66 140 168 203
Dividends 0.0 0.0 0.0 0.0
FCFF -39.6 83.0 18.9 23.6
P/E (x) 142.5 47.1 39.0 31.7
P/B (x) 16.8 8.0 6.6 5.5
EV/EBITDA (x) 75.1 39.4 27.6 22.1
ROE (%) 19 % 24 % 19 % 19 %
Core ROIC (%) 15 % 49 % 89 % 40 %
EBITDA Margin (%) 5 % 6 % 7 % 7 %
Net Margin (%) 3 % 5 % 5 % 5 %
Quess Corp Ltd. Absolute – ADD Relative – Overweight 5% ATR in 14 months
January 25, 2018 Analysts: Abhishek Shindadkar ([email protected], +91 9619 137 983, +91 22 4332 0634) Page 2 of 12
Exhibit 1: Overall revenue growth (yoy) trend
Source: Company, Equirus Securities
Exhibit 2: Overall EBIT margin trend
Source: Company, Equirus Securities
Exhibit 3: P&S revenue growth trend
Source: Company, Equirus Securities
Exhibit 4: P&S EBIT margin trend
Source: Company, Equirus Securities
57.2%
0.5%
155.2%
33.8% 35.7% 26.9%
17.7% 12.6% 21.0% 19.9%
37.1% 48.5%
0.0%
40.0%
80.0%
120.0%
160.0%
200.0%
FY13
9M
FY14
15M
FY15
FY16
1Q
17
2Q
17
3Q
17
4Q
17
FY17
1Q
18
2Q
18
3Q
18
Revenue Growth (yoy)
3.9%
3.5%
4.7%
4.0%
4.7% 4.7% 4.9%
4.6% 4.7% 4.8%
5.0%
3.0%
3.5%
4.0%
4.5%
5.0%
FY13
9M
FY14
15M
FY15
FY16
1Q
17
2Q
17
3Q
17
4Q
17
FY17
1Q
18
2Q
18
3Q
18
EBIT Margin
71.6%
-0.5%
126.8%
38.9% 48.7%
29.4%
8.1% 5.8% 20.3%
1.9% 10.3% 7.7%
-30.0%
0.0%
30.0%
60.0%
90.0%
120.0%
150.0%
FY13
9M
FY14
15M
FY15
FY16
1Q
17
2Q
17
3Q
17
4Q
17
FY17
1Q
18
2Q
18
3Q
18
P&S revenue growth (yoy)
3.9%
4.3% 4.2%
2.7%
4.4% 4.5%
4.7% 4.9% 5.0%
4.8% 4.8%
2.0%
2.5%
3.0%
3.5%
4.0%
4.5%
5.0%
1Q
16
2Q
16
3Q
16
4Q
16
1Q
17
2Q
17
3Q
17
4Q
17
1Q
18
2Q
18
3Q
18
P&S EBIT Margin
Quess Corp Ltd. Absolute – ADD Relative – Overweight 5% ATR in 14 months
January 25, 2018 Analysts: Abhishek Shindadkar ([email protected], +91 9619 137 983, +91 22 4332 0634) Page 3 of 12
Exhibit 5: GTS revenue growth trend
Source: Company, Equirus Securities
Exhibit 6: GTS EBIT margin trend
Source: Company, Equirus Securities
Exhibit 7: IFM revenue growth trend
Source: Company, Equirus Securities
Exhibit 8: IFM EBIT margin trend
Source: Company, Equirus Securities
31.1%
-2.4%
180.5%
25.2% 25.1% 27.4% 31.2% 29.8% 28.4% 11.5%
0.1%
23.2%
-50.0%
0.0%
50.0%
100.0%
150.0%
200.0%
FY13
9M
FY14
15M
FY15
FY16
1Q
17
2Q
17
3Q
17
4Q
17
FY17
1Q
18
2Q
18
3Q
18
GTS revenue growth (yoy)
7.2%
6.1%
5.4%
7.3% 7.1% 7.1% 7.5%
6.6% 6.7% 7.2% 7.0%
0.0%
2.0%
4.0%
6.0%
8.0%
1Q
16
2Q
16
3Q
16
4Q
16
1Q
17
2Q
17
3Q
17
4Q
17
1Q
18
2Q
18
3Q
18
GTS EBIT Margin
57.4%
12.0%
140.2%
23.1% 10.9% 10.4%
4.4% 9.8% 8.8% 10.1%
108.4%
6.7%
0.0%
40.0%
80.0%
120.0%
160.0%
FY13
9M
FY14
15M
FY15
FY16
1Q
17
2Q
17
3Q
17
4Q
17
FY17
1Q
18
2Q
18
3Q
18
IFM revenue growth (yoy)
3.5%
4.6% 4.8% 5.5%
3.6%
5.0% 5.3% 6.0% 6.2%
7.7% 7.9%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
1Q
16
2Q
16
3Q
16
4Q
16
1Q
17
2Q
17
3Q
17
4Q
17
1Q
18
2Q
18
3Q
18
IFM EBIT Margin
Quess Corp Ltd. Absolute – ADD Relative – Overweight 5% ATR in 14 months
January 25, 2018 Analysts: Abhishek Shindadkar ([email protected], +91 9619 137 983, +91 22 4332 0634) Page 4 of 12
Exhibit 9: IAM Revenue growth trend
Source: Company, Equirus Securities
Exhibit 10: IAM EBIT Margin trend
Source: Company, Equirus Securities
0.0% 0.0% 0.0%
50.9%
24.7%
32.7%
9.9% 4.5%
16.8%
6.4%
24.1%
39.4%
0.0%
12.0%
24.0%
36.0%
48.0%
60.0%
FY13
9M
FY14
15M
FY15
FY16
1Q
17
2Q
17
3Q
17
4Q
17
FY17
1Q
18
2Q
18
3Q
18
IAM revenue growth (yoy)
10.2%
4.9%
9.5% 10.4% 10.4%
9.8%
5.7% 4.8% 4.5% 4.7%
3.7%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
1Q
16
2Q
16
3Q
16
4Q
16
1Q
17
2Q
17
3Q
17
4Q
17
1Q
18
2Q
18
3Q
18
IAM EBIT Margin
Quess Corp Ltd. Absolute – ADD Relative – Overweight 5% ATR in 14 months
January 25, 2018 Analysts: Abhishek Shindadkar ([email protected], +91 9619 137 983, +91 22 4332 0634) Page 5 of 12
Quarterly performance (Consolidated)
Q3FY18 Q3FY18E Q2FY18 Q3FY17 % Change
Comments Q3FY18E Q2FY18 Q3FY17
Net Sales 15,840 17,128 13,953 10,668 -7.5% 13.5% 48.5%
Raw Materials Consumed 396 137 328 114 189.1% 20.9% 248.0%
Employee Costs 13,084 14,718 11,692 9,065 -11.1% 11.9% 44.3%
Other Expenses 1,450 1,370 1,144 892 5.8% 26.8% 62.6%
Total Expenditures 14930 16226 13164 10071 -8.0% 13.4% 48.3%
EBITDA 909 903 789 597 0.7% 15.3% 52.3%
Depreciation 122 83 83 72 48.3% 47.0% 69.0%
EBIT 787 820 706 525 -4.1% 11.5% 50.0%
Interest 171 170 155 123 0.0% 10.0% 38.9%
Other Income 126 100 168 60 25.6% -25.1% 108.2%
PBT 742 750 719 462 -1.0% 3.3% 60.6%
Tax 53 0 -764 130 #DIV/0! -106.9% -59.5%
PAT before MI & Associates 690 750 1483 332 -8.0% -53.5% 107.5%
Minority Interest 0 0 0 0
Profit from Assoc. 0 0 0 5
Recurring PAT 690 750 1,483 337 -8.0% -53.5% 104.8%
Extraordinaries -9 0 2 -5 - -481.3% 89.5%
Reported PAT 699 750 1,481 341 -6.8% -52.8% 104.6%
EPS (Rs) 4.7 5.4 10.2 2.3 -12.5% -53.5% 104.8%
EBITDA Margin 5.7% 5.3% 5.7% 5.6% 47 9 14
EBIT Margin 5.0% 4.8% 5.1% 4.9% 18 -9 5
PBT Margin 4.7% 4.4% 5.2% 4.3% 31 -47 35
PAT Margin 4.4% 4.4% 10.6% 3.2% 3 -620 121
Tax Rate 7.1% 0.0% -106.3% 28.1% 708 11,336 -2,101
Quess Corp Ltd. Absolute – ADD Relative – Overweight 5% ATR in 14 months
January 25, 2018 Analysts: Abhishek Shindadkar ([email protected], +91 9619 137 983, +91 22 4332 0634) Page 6 of 12
Company Snapshot
How we differ from Consensus
- Equirus Consensus % Diff Comment
EPS FY18E 23.6 21.7 9 % Consensus before earnings.
FY19E 28.5 29.0 -2 %
Sales FY18E 62,790 59,885 5 %
FY19E 81,325 77,644 5 %
PAT FY18E 3,444 3,049 13 %
FY19E 4,145 4,111 1 %
Our Key Investment arguments:
Large and fragmented market
Growth in formal workforce
Shift from unorganized to organized driven by macro tailwinds and regulatory
changes
M&A remains a strategic and scale driver
Sticky client relationships aid revenue visibility
Better client mining driven by value added services
EBITDAM expansion led by recovery in MFX/Brainhunter margins, mix change
Risk to Our View
Growth largely driven by the inorganic route
Increased macroeconomic volatility
Limited management bandwidth given large breadth of operations
Key parameters FY17A FY18E FY19E FY20E
Overall Revenue (Rs Mn) 41,574 62,790 81,325 93,534
P&S revenue (Rs Mn) 23,454 28,145 33,211 39,189
GTS Revenue (Rs Mn) 11,830 17,007 18,367 19,837
IFM Revenue (Rs Mn) 4,046 10,105 12,929 15,257
IAM Revenue (Rs Mn) 2,244 2,603 3,019 3,502
EBIT Margin(%) 4.7% 5.4% 6.0% 6.4%
PBT Margin(%) 4.0% 5.2% 5.4% 6.0%
PAT Margin(%) 2.7% 5.5% 5.1% 5.4%
Key Triggers
Increasing contribution of T&D segment revenue (with 25% EBITDA margins)
MFX and Brainhunter margin expansion
Sensitivity to Key Variables % Change % Impact on EPS
P&S Segment 1 % 6 %
GTS Segment 1 % 3 %
- - -
DCF Valuations & Assumptions
Rf Beta Ke Term. Growth Debt/IC in Term. Yr
6.9 % 0.9 12.6 % 3.0 % -8.2 %
- FY18E FY19E FY20-22E FY23-27E FY28-32E
Sales Growth 51 % 30 % 13 % 14 % 12 %
NOPAT Margin 6 % 6 % 6 % 8 % 8 %
IC Turnover 15.77 12.62 4.82 4.90 4.96
RoIC 49.3 % 88.9 % 36.2 % 41.3 % 41.3 %
Years of strong growth 1 2 5 10 15
Valuation as on date (Rs) 183 226 152 323 424
Valuation as of Mar '19 210 260 175 371 487
Based on DCF, assuming 10 years of 14% CAGR growth and 41.3% average ROIC, we derive
our current fair value of Rs 323 and a 31 Mar’19 fair value of Rs 371.
Company Description:
Quess Corp is one of India’s leading integrated business services providers handling end-
to-end business functions. They offer comprehensive solutions including recruitment,
temporary staffing, technology staffing, IT products and solutions, payroll, compliance
management, integrated facility management and industrial asset management services.
Comparable valuation Mkt Cap
Rs. Mn.
Price
Target
Target
Date
EPS P/E BPS P/B RoE Div Yield
Company Reco. CMP FY17A FY18E FY19E FY17A FY18E FY19E FY17A FY18E FY17A FY18E FY19E FY17A FY18E
QuessCorp ADD 1,110 163,015 1,174 31st Mar 19 7.8 23.6 28.5 142.5 47.1 39.0 65.9 8.0 19 % 24 % 19 % 0.0 % 0.0 %
TeamLease ADD 2,199 37,814 1,986 31st Mar 19 32.9 40.2 52.3 67.9 55.6 42.8 222.9 8.5 16 % 17 % 18 % 0.0 % 0.0 %
SIS - 1,221 87,892 - - - - - - - - - - - - - - -
Quess Corp Ltd. Absolute – ADD Relative – Overweight 5% ATR in 14 months
January 25, 2018 Analysts: Abhishek Shindadkar ([email protected], +91 9619 137 983, +91 22 4332 0634) Page 7 of 12
Consolidated Quarterly Earnings Forecast and Key Drivers Rs in Mn 1Q17A 2Q17A 3Q17A 4Q17A 1Q18A 2Q18A 3Q18A 4Q18E 1Q19E 2Q19E 3Q19E 4Q19E FY17A FY18E FY19E FY20E
Revenue 9,910 10,177 10,668 11,221 11,881 13,953 15,840 21,117 18,358 19,906 20,973 22,088 41,574 62,790 81,325 93,534 Raw Materials Consumed 124 194 114 98 111 328 396 528 165 175 180 186 469 1,363 706 786
Employee Costs 8,545 8,714 9,065 9,567 10,179 11,692 13,084 17,422 15,678 16,960 17,932 18,908 35,435 52,378 69,478 79,871
Other Expenses 712 717 892 970 955 1,144 1,450 1,737 1,340 1,453 1,489 1,568 3,442 5,287 5,851 6,398
- - - - - - - - - - - - - - - - -
- - - - - - - - - - - - - - - - - EBITDA 527 551 597 586 635 789 909 1,430 1,175 1,318 1,372 1,426 2,228 3,763 5,290 6,479 Depreciation 60 69 72 65 67 83 122 84 92 100 107 114 264 357 412 478 EBIT 467 482 525 521 568 706 787 1,345 1,083 1,218 1,265 1,312 1,964 3,406 4,878 6,000 Interest 92 98 123 153 161 155 171 183 160 157 157 154 465 669 629 591 Other Income 7 57 60 29 34 168 126 202 27 28 29 29 153 530 114 249 PBT 382 441 462 396 441 719 742 1,364 950 1,089 1,136 1,187 1,651 3,267 4,363 5,658 Tax 135 139 130 116 115 -764 53 431 48 54 57 59 518 -165 218 566 PAT bef. MI & Assoc. 247 301 332 280 326 1,483 690 933 903 1,035 1,079 1,128 1,133 3,432 4,145 5,093 Minority Interest 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Profit from Assoc. 0 0 5 -3 0 0 0 0 0 0 0 0 0 0 0 0 Recurring PAT 247 301 337 276 326 1,483 690 933 903 1,035 1,079 1,128 1,133 3,432 4,145 5,093 Extraordinaries 0 13 -5 38 -6 2 -9 0 0 0 0 0 0 -12 0 0 Reported PAT 247 288 341 239 331 1,481 699 933 903 1,035 1,079 1,128 1,133 3,444 4,145 5,093
EPS (Rs) 1.70 2.07 2.32 1.90 2.24 10.19 4.74 6.42 6.21 7.11 7.42 7.75 7.79 23.59 28.49 35.00
Key Drivers
P&S Revenues - - - - - - - - - - - - 23,454 28,145 33,211 39,189 GTS Revenues - - - - - - - - - - - - 11,830 17,007 18,367 19,837 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
- - - - - - - - - - - - - - - - -
Sequential Growth (%)
Revenue -1 % 3 % 5 % 5 % 6 % 17 % 14 % 33 % -13 % 8 % 5 % 5 % - - - - Raw Materials Consumed 0 % 56 % -41 % -14 % 14 % 194 % 21 % 33 % -69 % 6 % 3 % 3 % - - - - EBITDA 31 % 5 % 8 % -2 % 8 % 24 % 15 % 57 % -18 % 12 % 4 % 4 % - - - - EBIT 38 % 3 % 9 % -1 % 9 % 24 % 12 % 71 % -19 % 12 % 4 % 4 % - - - - Recurring PAT -11 % 22 % 12 % -18 % 18 % 355 % -53 % 35 % -3 % 15 % 4 % 4 % - - - -
EPS -11 % 22 % 12 % -18 % 18 % 355 % -53 % 35 % -3 % 15 % 4 % 4 % - - - -
Yearly Growth (%)
Revenue 36 % 27 % 18 % 13 % 20 % 37 % 48 % 88 % 55 % 43 % 32 % 5 % 21 % 51 % 30 % 15 % EBITDA 60 % 45 % 49 % 46 % 20 % 43 % 52 % 144 % 85 % 67 % 51 % 0 % 47 % 69 % 41 % 22 % EBIT 50 % 40 % 41 % 54 % 21 % 46 % 50 % 158 % 91 % 73 % 61 % -2 % 44 % 73 % 43 % 23 % Recurring PAT 37 % 66 % 95 % 0 % 32 % 392 % 105 % 238 % 177 % -30 % 56 % 21 % 40 % 203 % 21 % 23 %
EPS 37 % 66 % 95 % 0 % 32 % 392 % 105 % 238 % 177 % -30 % 56 % 21 % 40 % 203 % 21 % 23 %
Margin (%)
EBITDA 5 % 5 % 6 % 5 % 5 % 6 % 6 % 7 % 6 % 7 % 7 % 6 % 5 % 6 % 7 % 7 % EBIT 5 % 5 % 5 % 5 % 5 % 5 % 5 % 6 % 6 % 6 % 6 % 6 % 5 % 5 % 6 % 6 % PBT 4 % 4 % 4 % 4 % 4 % 5 % 5 % 6 % 5 % 5 % 5 % 5 % 4 % 5 % 5 % 6 %
PAT 2 % 3 % 3 % 2 % 3 % 11 % 4 % 4 % 5 % 5 % 5 % 5 % 3 % 5 % 5 % 5 %
Quess Corp Ltd. Absolute – ADD Relative – Overweight 5% ATR in 14 months
January 25, 2018 Analysts: Abhishek Shindadkar ([email protected], +91 9619 137 983, +91 22 4332 0634) Page 8 of 12
Consolidated Financials
P&L (Rs Mn) FY17A FY18E FY19E FY20E
Balance Sheet (Rs Mn) FY17A FY18E FY19E FY20E
Cash Flow (Rs Mn) FY17A FY18E FY19E FY20E
Revenue 41,574 62,790 81,325 93,534 Equity Capital 1,268 1,455 1,455 1,455 PBT 1,652 3,267 4,363 5,658
Op. Expenditure 39,346 59,028 76,035 87,055 Reserve 7,094 18,850 22,996 28,088 Depreciation 264 357 412 478
EBITDA 2,228 3,763 5,290 6,479 Networth 8,362 20,305 24,450 29,543 Others 380 12 0 0
Depreciation 264 357 412 478 Long Term Debt 7,304 -105 -531 -733 Taxes Paid 802 -165 218 566
EBIT 1,964 3,406 4,878 6,000 Def Tax Liability 1,553 -20 -94 -119 Change in WC -759 -1,942 -611 -463
Interest Expense 465 669 629 591 Minority Interest 9 0 0 0 Operating C/F 736 1,859 3,946 5,108
Other Income 153 530 114 249 Account Payables 631 809 937 1,073 Capex -379 8,673 -1,800 -2,200
PBT 1,651 3,267 4,363 5,658 Other Curr Liabi 4,944 5,460 7,072 8,133 Change in Invest -3,865 0 0 0
Tax 518 -165 218 566 Total Liabilities & Equity 22,803 26,449 31,835 37,897 Others -1,562 0 0 0
PAT bef. MI & Assoc. 1,133 3,432 4,145 5,093 Net Fixed Assets 583 576 554 536 Investing C/F -5,806 8,673 -1,800 -2,200
Minority Interest 0 0 0 0 Capital WIP 77 0 0 0 Change in Debt 3,700 -7,409 -426 -202
Profit from Assoc. 0 0 0 0 Others 8,635 -311 1,099 2,839 Change in Equity 3,712 8,500 0 0
Recurring PAT 1,133 3,432 4,145 5,093
Inventory 57 60 71 82 Others -404 -1,582 -74 -26
Extraordinaires 0 -12 0 0 Account Receivables 4,468 6,021 7,353 7,944 Financing C/F 7,008 -492 -500 -227
Reported PAT 1,133 3,444 4,145 5,093 Other Current Assets 4,386 5,467 6,475 7,533 Net change in cash 1,938 10,039 1,646 2,681
FDEPS (Rs) 7.8 23.6 28.5 35.0 Cash 4,596 14,635 16,282 18,963 RoE (%) 19 % 24 % 19 % 19 %
DPS (Rs) 0.0 0.0 0.0 0.0 Total Assets 22,803 26,449 31,835 37,897
RoIC (%) 12 % 22 % 22 % 21 %
CEPS (Rs) 11.6 28.0 31.3 38.3 Non-cash Working Capital 3,337 5,279 5,890 6,353
Core RoIC (%) 15 % 49 % 89 % 40 %
FCFPS (Rs) -39.6 83.0 18.9 23.6 Cash Conv Cycle 29.3 30.7 26.4 24.8 Div Payout (%) 0 % 0 % 0 % 0 %
BVPS (Rs) 65.9 139.6 168.1 203.1 WC Turnover 12.5 11.9 13.8 14.7 P/E 142.5 47.1 39.0 31.7
EBITDAM (%) 5 % 6 % 7 % 7 % FA Turnover 62.9 108.9 146.7 174.5 P/B 16.8 8.0 6.6 5.5
PATM (%) 3 % 5 % 5 % 5 % Net D/E 0.3 -0.7 -0.7 -0.7 P/FCFF -28.1 13.4 58.9 46.9
Tax Rate (%) 31 % -5 % 5 % 10 % Revenue/Capital Employed 6.5 5.0 4.3 4.3 EV/EBITDA 75.1 39.4 27.6 22.1
Sales Growth (%) 21 % 51 % 30 % 15 %
Capital Employed/Equity 2.0 2.1 1.3 1.0
EV/Sales 4.0 2.4 1.8 1.5
FDEPS Growth (%) 40 % 203 % 21 % 23 %
Dividend Yield (%) 0.0 % 0.0 % 0.0 % 0.0 %
TTM P/E vs. 2 yr forward EPS growth TTM P/B vs. 2 yr forward RoE
10x
20x
40x
60x
80x
0%
20%
40%
60%
80%
100%
120%
140%
0
500
1000
1500
2000
2500
3000
3500
Jul/
16
Sep/16
Nov/
16
Jan/17
Mar/
17
May/
17
Jul/
17
Sep/17
Nov/
17
Jan/18
Mar/
18
May/
18
Jul/
18
Sep/18
Nov/
18
Jan/19
Mar/
19
EPS Growth
0%
5%
10%
15%
20%
25%
30%
35%
0
500
1000
1500
2000
2500
3000
3500
4000
4500
5000
Jul/
16
Sep/
16
Nov
/16
Jan/
17
Mar
/17
May
/17
Jul/
17
Sep/
17
Nov
/17
Jan/
18
Mar
/18
May
/18
Jul/
18
Sep/
18
Nov
/18
Jan/
19
Mar
/19
RoE
5x
8x
10x
15x
20x
Quess Corp Ltd. Absolute – ADD Relative – Overweight 5% ATR in 14 months
January 25, 2018 Analysts: Abhishek Shindadkar ([email protected], +91 9619 137 983, +91 22 4332 0634) Page 9 of 12
Historical Consolidated Financials
P&L (Rs Mn) FY14A FY15A FY16A FY17A
Balance Sheet (Rs Mn) FY14A FY15A FY16A FY17A
Cash Flow (Rs Mn) FY14A FY15A FY16A FY17A
Revenue 10,060 25,671 34,350 41,574 Equity Capital 962 258 1,133 1,268 PBT 289 1,042 1,147 1,652
Op. Expenditure 9,662 24,366 32,839 39,346 Reserve 884 2,433 2,433 7,094 Depreciation 42 101 144 264
EBITDA 398 1,305 1,511 2,228 Networth 1,845 2,691 3,566 8,362 Others 123 235 318 380
Depreciation 42 101 144 264 Long Term Debt 675 2,204 3,783 7,304 Taxes Paid 249 412 482 802
EBIT 356 1,203 1,367 1,964 Def Tax Liability 23 92 434 1,553 Change in WC -52 -942 -1,622 -759
Interest Expense 88 218 310 465 Minority Interest 0 0 0 9 Operating C/F 153 24 -495 736
Other Income 21 57 91 153 Account Payables 48 417 674 631 Capex -92 -145 -226 -379
PBT 289 1,042 1,147 1,651 Other Curr Liabi 1,390 1,958 4,043 4,944 Change in Invest -657 -525 114 -3,865
Tax 97 370 335 518 Total Liabilities & Equity 3,982 7,362 12,500 22,803 Others 89 -23 22 -1,562
PAT bef. MI & Assoc. 192 672 812 1,133 Net Fixed Assets 852 174 502 583 Investing C/F -660 -692 -89 -5,806
Minority Interest 13 0 0 0 Capital WIP 0 0 24 77 Change in Debt 163 1,015 1,080 3,700
Profit from Assoc. 0 0 0 0 Others 677 2,310 3,525 8,635 Change in Equity 965 0 26 3,712
Recurring PAT 179 672 812 1,133 Inventory 4 5 18 57 Others -490 -217 -247 -404
Extraordinaires 0 0 0 0 Account Receivables 1,245 2,380 4,053 4,468 Financing C/F 638 798 858 7,008
Reported PAT 179 672 812 1,133 Other Current Assets 912 1,674 3,285 4,386 Net change in cash 132 130 274 1,938
EPS (Rs) 1.2 4.6 5.6 7.8 Cash 291 818 1,094 4,596
RoE (%) 14 % 30 % 26 % 19 %
DPS (Rs) 0.0 0.0 0.0 0.0
Total Assets 3,982 7,362 12,500 22,803
RoIC (%) 11 % 22 % 16 % 12 %
CEPS (Rs) 7.4 8.0 20.1 11.6 Non-cash Working Capital 723 1,684 2,639 3,337 Core RoIC (%) 14 % 23 % 16 % 15 %
FCFPS (Rs) -14.9 -5.5 -7.6 -39.6 Cash Conv Cycle 26.2 23.9 28.0 29.3 Div Payout (%) 0 % 0 % 0 % 0 %
BVPS (Rs) 19.2 104.4 31.5 65.9 WC Turnover 13.9 15.2 13.0 12.5
P/E 904.0 240.3 198.9 142.5
EBITDAM (%) 4 % 5 % 4 % 5 % FA Turnover 11.8 147.3 65.3 62.9 P/B 57.9 10.6 35.3 16.8
PATM (%) 2 % 3 % 2 % 3 % Net D/E 0.2 0.5 0.8 0.3 P/FCFF -74.3 -202.6 -145.2 -28.1
Tax Rate (%) 34 % 35 % 29 % 31 % Revenue/Capital Employed 6.7 11.9 9.1 6.5 EV/EBITDA 410.2 126.1 110.3 0.0
Sales growth (%) 0 % 155 % 34 % 21 %
Capital Employed/Equity 2.5 1.7 1.7 2.0
EV/Sales 16.2 6.4 4.8 0.0
FDEPS growth (%) 48 % 276 % 21 % 40 %
Dividend Yield (%) 0.0 % 0.0 % 0.0 % 0.0 %
*FY14 is 9 months fiscal and FY15 is 15 months fiscal.
Quess Corp Ltd. Absolute – ADD Relative – Overweight 5% ATR in 14 months
January 25, 2018 Analysts: Abhishek Shindadkar ([email protected], +91 9619 137 983, +91 22 4332 0634) Page 10 of 12
Equirus Securities
Research Analysts Sector/Industry Email
Equity Sales E-mail
Abhishek Shindadkar IT Services [email protected] 91-22-43320643 VishadTurakhia [email protected] 91-22-43320633
Ashutosh Tiwari Auto, Metals & Mining [email protected] 91-79-61909517 Subham Sinha [email protected] 91-22-43320631
Depesh Kashyap Mid-Caps [email protected] 91-79-61909528 SwetaSheth [email protected] 91-22-43320634
Devam Modi Power & Infrastructure [email protected] 91-79-61909516 Viral Desai [email protected] 91-22-43320635
Dhaval Dama FMCG, Mid-Caps [email protected] 91-79-61909518 Dealing Room E-mail
Manoj Gori Consumer Durables [email protected] 91-79-61909523 Ashish Shah [email protected] 91-22-43320662
Maulik Patel Oil and Gas [email protected] 91-79-61909519 IleshSavla [email protected] 91-22-43320666
Praful Bohra Pharmaceuticals [email protected] 91-79-61909532 Manoj Kejriwal [email protected] 91-22-43320663
Rohan Mandora Banking & Financial Services [email protected] 91-79-61909529 Dharmesh Mehta [email protected] 91-22-43320661
Associates E-mail Sandip Amrutiya [email protected] 91-22-43320660
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Bharat Celly [email protected] 91-79-61909524 Jay Soni [email protected] 91-79-61909561
Harshit Patel [email protected] 91-79-61909522 Corporate Communications E-mail
Meet Chande [email protected] 91-79-61909513 MahdokhtBharda [email protected] 91-22-43320647 ParvaSoni [email protected] 91-79-61909521
Pranav Mehta [email protected] 91-79-61909514
Ronak Soni [email protected] 91-79-61909525
Samkit Shah [email protected] 91-79-61909520
Shreepal Doshi [email protected] 91-79-61909541
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Vikas Jain [email protected] 91-79-61909531
Rating & Coverage Definitions: Absolute Rating • LONG : Over the investment horizon, ATR >= Ke for companies with Free Float market cap >Rs 5 billion and ATR >= 20% for rest of the companies • ADD: ATR >= 5% but less than Ke over investment horizon • REDUCE: ATR >= negative 10% but <5% over investment horizon • SHORT: ATR < negative 10% over investment horizon Relative Rating • OVERWEIGHT: Likely to outperform the benchmark by at least 5% over investment horizon • BENCHMARK: likely to perform in line with the benchmark • UNDERWEIGHT: likely to under-perform the benchmark by at least 5% over investment horizon Investment Horizon Investment Horizon is set at a minimum 3 months to maximum 18 months with target date falling on last day of a calendar quarter. Lite vs. Regular Coverage vs. Spot Coverage We aim to keep our rating and estimates updated at least once a quarter for Regular Coverage stocks. Generally, we would have access to the company and we would maintain detailed financial model for Regular coverage companies. We intend to publish updates on Lite coverage stocks only an opportunistic basis and subject to our ability to contact the management. Our rating and estimates for Lite coverage stocks may not be current. Spot coverage is meant for one-off coverage of a specific company and in such cases, earnings forecast and target price are optional. Spot coverage is meant to stimulate discussion rather than provide a research opinion.
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Unit No. 1201, 12th Floor, C Wing, Marathon Futurex,
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Tel. No: +91 – (0)22 – 4332 0600
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Quess Corp Ltd. Absolute – ADD Relative – Overweight 5% ATR in 14 months
January 25, 2018 Analysts: Abhishek Shindadkar ([email protected], +91 9619 137 983, +91 22 4332 0634) Page 11 of 12
© 2017 Equirus Securities Private Limited. All rights reserved. For Private Circulation only. This report or any portion hereof may not
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Analyst Certification
I, Abhishek Shindadkar, author to this report, hereby certify that all of the views expressed in this report accurately reflect my personal views about the subject company or companies and its or their securities. I
also certify that no part of my compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in this report.
Disclosures
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Capital Market (Reg. No. INB231301731), Futures & Options Segment (Reg. No.INF231301731) of the National Stock Exchange of India Ltd. (NSE) and on Cash Segment (Reg. No.INB011301737) of Bombay Stock
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Quess Corp Ltd. Absolute – ADD Relative – Overweight 5% ATR in 14 months
January 25, 2018 Analysts: Abhishek Shindadkar ([email protected], +91 9619 137 983, +91 22 4332 0634) Page 12 of 12
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Disclosure of Interest statement for the subject Company Yes/No If Yes, nature of such interest
Research Analyst’ or Relatives’ financial interest No
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