May 8, 2017
ICICI Securities Ltd | Retail Equity Research
Result Update
H2FY18E expected to better than H1…
Firstsource’s results were below our expectations largely due to
lower-than-expected EBITDA margin estimates
Revenues from operations increased 0.5% QoQ to | 864.4 crore
lower than our | 878.1 crore and 2.1% QoQ growth estimate
At 11.1%, EBITDA margins declined 100 bps QoQ and were way
below our 12.5% estimate
Reported PAT of | 65.4 crore was below our | 74.9 crore estimate
mainly led by margin miss
Mortgage business drags growth…
FSL’s revenues from core operations grew 0.5% QoQ to | 864.4 crore led
by contribution from the Sky deal. Growth was supported by India (grew
9.5% QoQ) among geography and healthcare (7.6% QoQ), telecom &
media (2% QoQ) among verticals. Revenue growth was partly offset by
~40% reduction in US mortgage business led by decline in volumes.
ISGN contributed ~US$7.8-8 million to revenues in Q4 and ~US$40-43
million in FY17. The management expects revenue contribution from
ISGN to be better in FY18E compared to FY17. As per management
guidance, the Sky deal contributed ~US$10-12 million in revenue in FY17
and expects incremental revenues of ~US$28-30 million for FY18E. The
deal pipeline was healthy with ~US$375 million, which was up ~7% QoQ
with strong traction in the healthcare space.
Expects muted Q1FY18, growth to bounce back from Q2FY18E…
The management expects Q1FY18 to be a muted quarter owing to
underperformance of the mortgage business and currency headwinds.
However, it expects growth momentum to bounce back in Q2FY18 led by
deal closures and mortgage business attaining breakeven in Q1 leading to
a better H2FY18E performance than H1FY18E. For FY18E, the
management expects revenue growth to be in line with industry growth
rates (6-8%) in CC terms. Consequently, we expect FSL revenues from
core operations to grow at a CAGR of 5.5% in FY17-19E.
Guides for 50-60 bps improvement in margins…
EBITDA margins declined 100 bps QoQ to 11.1% and were way below
our 12.5% estimate. The margin decline was mainly on account of
absorption of 1200 new employees in the UK as a part of 10 year
partnership deal with Sky leading to 4.5% increase in employee cost
sequentially. Also, loss in the mortgage business and currency headwind
impacted margins in Q4. The management expects EBITDA in Q1FY18 to
be at the same levels as Q4FY17 on the back of muted revenue growth.
Overall, the management expects margins to increase 50-60 bps YoY in
FY18E led by growth momentum from Q2FY18 onwards. We expect
margins at 12.5%, 12.8% in FY18E, FY19E, respectively.
Sky deal ramp-up may benefit; maintain BUY…
A healthy deal pipeline, ramp-up of Sky deal in FY18E and breakeven in
mortgage business in Q1FY18 may drive growth, going ahead.
Consequently, we estimate FSL may report revenue, PAT CAGR of 5.5%,
10.5%, respectively, in FY17-19E with average EBITDA margins at 12.5%
in FY17-18E. FSL’s debt repayment plan is on track with net debt at
US$80.7 million as on March 2017. It could become debt free by FY19E.
We value FSL Ltd with a revised target price of | 45/share (9x FY19E EPS,
largely in line with its historical multiple for last 10 years).
Firstsource Solutions (FIRSOU) | 39
Rating matrix
Rating : Buy
Target : | 45
Target Period : 12 months
Potential Upside : 16%
What’s changed?
Target Changed from | 46 to | 45
EPS FY18E Changed from | 4.3 to | 4.4
EPS FY19E Introduced at | 5
Rating Unchanged
Quarterly performance
Q4FY17 Q4FY16 YoY (%) Q3FY17 QoQ (%)
Revenue 892 869 2.6 885 0.8
EBITDA 99 111 (11.1) 107 (7.6)
EBITDA (%) 11.1 12.8 -172 bps 12.1 -101 bps
PAT 65 76 (14.2) 69 (5.9)
Key financials
| Crore FY16 FY17P FY18E FY19E
Net Sales 3,240 3,556 3,659 3,944
EBITDA 413 438 457 503
Net Profit 269 279 297 342
EPS (|) 3.8 4.1 4.4 5.0
Valuation summary
FY16 FY17P FY18E FY19E
P/E 10.2 9.4 8.9 7.7
Target P/E 11.8 10.9 10.3 9.0
EV / EBITDA 7.7 6.7 6.0 5.0
P/BV 1.3 1.1 1.0 0.9
RoNW (%) 12.9 11.5 11.0 11.4
RoCE (%) 11.7 12.1 12.1 13.0
Stock data
Particular Amount
Market Capitalization (| Crore) 2,582.3
Total Debt (| Crore) 692.1
Cash and Investments (| Crore) 76.8
EV (| Crore) 1,966.9
52 week H/L 54 / 31
Equity capital 673.3
Face value 10.0
Price performance
1M 3M 6M 12M
FSOL (8.4) (3.7) (1.3) (3.7)
HGS (7.7) (0.4) (3.0) 34.2
EXL 8.5 9.5 11.6 3.0
Genpact 7.1 1.6 10.0 (7.3)
Research Analyst
Deepak Purswani, CFA
Deepti Tayal
ICICI Securities Ltd | Retail Equity Research Page 2
Variance analysis
Q4FY17 Q4Y17E Q4FY16 YoY (%) Q3FY17 QoQ (%) Comments
Revenue 892.3 903.4 869.4 2.6 885.4 0.8 Revenues from core operations grew 0.5% QoQ
Employee expenses 616.7 600.8 580.4 6.9 590.1 5.0
Gross Margin 275.6 302.6 289.0 -4.6 295.3 -6.7
Gross margin (%) 30.9 33.5 33.2 -235 bps 33.4 -246 bps
SG&A expenses 176.6 189.7 177.6 -0.6 188.2 -6.1
EBITDA 99.0 112.9 111.4 -11.1 107.1 -7.6
EBITDA Margin (%) 11.1 12.5 12.8 -172 bps 12.1 -101 bps Margins declined due to higher employee cost
Depreciation & amortisation 11.0 16.3 14.7 -24.8 15.6 -29.1
EBIT 88.0 96.7 96.7 -9.0 91.6 -3.9
EBIT Margin (%) 9.9 10.7 11.1 -126 bps 10.3 -48 bps
Other income (less interest) 11.4 8.8 13.0 -12.0 9.9 15.5
PBT 99.4 105.4 109.7 -9.4 101.5 -2.0
Tax paid 11.2 14.4 9.5 17.4 13.4 -16.2
PAT 65.4 74.7 76.2 -14.2 69.5 -5.9
PAT was below our expectations due to lower than expectation revenue
growth and margin miss
Source: Company, ICICIdirect.com Research
Change in estimates
FY18E FY19E
(| Crore) Old New % Change Introduced Comments
Revenue 3,972 3,659 -7.9 3,944
EBITDA 532 457 -14.1 503
EBITDA Margin (%) 13.4 12.5 -88 bps 12.8
PAT 342 297 -13.2 342
EPS (|) 4.9 4.4 -10.8 5.0 Revised our estimates owing to margin revision estimates
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research Page 3
Company Analysis
Conference call highlights…
The management anticipates revenue growth will be in line with
industry growth rates (6-8%) in CC terms for FY18E. They expect
Q1 to be soft with growth to bounce back from Q2FY18E onwards
leading to better H2FY18E than H1
Sky deal contributed ~US$10-12 million in revenue in FY17 and
expects incremental revenues of ~US$28-30 million for FY18E vs.
its earlier guidance of ~US$35-40 million due to its rebalancing of
portfolio. Around ~1200 new employees in UK were absorbed in
the quarter as a part of 10 year partnership deal with Sky
ISGN contributed US$40-43 million revenue in FY17. They expect
revenue contribution from ISGN to be better in FY18E compared
to FY17
The management expects margin to improve 50-60 bps in FY18E
owing to growth momentum from Q2FY18 onwards
Net long-term debt was at US$80.7 million as on Q4FY17. Cash
and cash equivalent was at | 191 crore vs. | 129.3 crore in
Q3FY17. Capex during the quarter was at | 20.2 crore vs. | 17.6
crore in Q3FY17
Employee strength was at 25,871 with net reduction of 121
employees in the quarter. Reduction was on account of actions in
mortgage business offset by addition of ~1200 employees in
March 2017 as a part of the Sky deal. Seat fill factor improved to
79% vs. 75% in Q3FY17
ICICI Securities Ltd | Retail Equity Research Page 4
H2FY18E to be better compared to H1…
FSL’s revenues from core operations grew 0.5% QoQ to | 864.4 crore led
by contribution from the Sky deal. Revenue growth was partly offset by
~40% reduction in the US mortgage business led by volume decline.
ISGN contributed ~US$7.8-8 million to revenues in Q4 and ~US$40-43
million in FY17. The management expects revenue contribution from
ISGN to be better in FY18E compared to FY17. As per management
guidance, the Sky deal contributed ~US$10-12 million in revenue in FY17
and expects incremental revenues of ~US$28-30 million for FY18E. The
management expects Q1FY18 to be a muted one owing to
underperformance of the mortgage business and currency headwind.
However, it expects growth momentum to bounce back in Q2FY18 led by
deal closures with H2FY18E performance stronger than H1FY18E. For
FY18E, the management expects revenue growth to be in line with
industry growth rates (6-8%) in CC terms. We expect FSL’s revenues to
grow at a CAGR of ~5.5% in FY17-19E.
Among geography, India (6.1% of revenue) and the UK (38% of revenue)
led the growth with 9.5% and 1.6% QoQ growth, respectively, while ROW
(0.4% of revenue) and US (55.4% of revenue) declined sequentially by
33% and 0.9%, respectively. Growth in domestic business was on
account of ramp up of large banking deal. Among verticals, healthcare
(38.1% of revenue) grew 7.6% QoQ post average 2.1% sequential
revenue de-growth for last three consecutive quarters while telecom &
media (33.4% of revenue) grew 2% QoQ. BFSI (28% of revenue) declined
9.8% QoQ on top of 11.8% decline in Q3 due to weakness in mortgage
business offset by domestic banking growth.
Exhibit 1: Rupee revenue may grow at 5.3% CAGR during FY17-19E
20552255
2819
31063035
741 788 819 869
3240
894884
885 892
35563659
3944
0.0
9.7
25.0
10.2
-2.3
4.0
10.6
20.9
6.8
20.5
12.3
8.2
2.6
9.8
2.9
7.8
-10
0
10
20
30
40
500
1300
2100
2900
3700
4500
FY11
FY12
FY13
FY14
FY15
Q1FY16
Q2FY16
Q3FY16
Q4FY16
FY16
Q1FY17
Q2FY17
Q3FY17
Q4FY17
FY17P
FY18E
FY19E
%
| c
rore
Rupee revenue Growth, YoY
Source: Company, ICICIdirect.com Research
Higher employee cost drags margins…
EBITDA margins declined 100 bps QoQ to 11.1% and were way below
our 12.5% estimate. The margin decline was mainly on account of
absorption of 1200 new employees in the UK as a part of 10 year
partnership deal with Sky leading to 4.5% increase in employee cost
sequentially. Also, loss in mortgage business and currency headwind
impacted margins in Q4. On an absolute basis, FSL reported EBITDA of
| 99 crore, below our | 112.9 crore estimate. The management expects
EBITDA in Q1FY18 to be at the same level as Q4FY17 on the back of
muted revenue growth. Overall, the management expects margins to
increase 50-60 bps YoY in FY18E led by growth momentum from Q2FY18
onwards. We expect margins at 12.5%, 12.8% in FY18E, FY19E,
respectively.
ICICI Securities Ltd | Retail Equity Research Page 5
Exhibit 2: Modelling 20 bps YoY improvement in FY18E margins
14.1
8.2
9.9
11.7
12.5
11.411.9
12.412.8 12.7
13.312.7
12.1
11.1
12.3 12.5 12.8
5
8
11
14
17
20
FY11
FY12
FY13
FY14
FY15
Q1FY16
Q2FY16
Q3FY16
Q4FY16
FY16
Q1FY17
Q2FY17
Q3FY17
Q4FY17
FY17P
FY18E
FY19E
%
EBITDA margin
Source: Company, ICICIdirect.com Research
Exhibit 3: Growth, headcount rationalisation to drive seat fill factor higher
71.0
74.1
81.8
77.0
69.0 68.0
66.6 66.0
68.0 68.0
72.0 72.0
75.0
79.0
65
69
73
77
81
85
FY11
FY12
FY13
FY14
FY15
Q1FY16
Q2FY16
Q3FY16
Q4FY16
FY16
Q1FY17
Q2FY17
Q3FY17
Q4FY17
%
Seat fill factor
Source: Company, ICICIdirect.com Research
Top customer revenue grew ~2.6% QoQ…
Top customer (24.0% of revenue) grew 2.6% vs. growth of 19.1% QoQ
led the overall marginal revenue growth for the company. Top 2-5
customer revenues declined 14.3% QoQ while non-top five clients grew
5.5% QoQ on top of 1.8% decline in Q3FY17.
Debt repayment on track…
As on Q4FY17 end, FSL had net long term debt of $80.7 million vs. US$72
million at the end of Q3. The increased position was due to conversion of
some of working capital, predictable working debt, short-term debt into
long-term debt. However, on a like-to-like basis, it was a reduction in the
debt figures. At the current repayment rate of US$11.25 million quarterly
run rate, FSL would be debt free by FY19E. Cash and cash equivalent was
at | 191 crore as on March 31, 2017.
Sky deal may add incremental revenue of ~US$28-30 million in FY18E…
The Sky deal is progressing well as per planned timelines. On track to
transition, 1200 employees were added in March 2017. The management
expects the deal to contribute incremental revenue to the tune of
~US$28-30 million in FY18E leading to ~5-6% overall revenue visibility in
FY18E.
ICICI Securities Ltd | Retail Equity Research Page 6
Exhibit 4: Sky deal…
Particulars
Total Increase in employees ~1400
Contract signing Nov-16
1st phase of transition Sep-16
Addition of employees in Phase I ~257
2nd phase of transition Mar-17
Addition of employees in Phase II ~1200
Revenue contribution in FY17E ~$ 10-12 mn
Revenue contribution in FY18E ~$ 30 mn
Total Investment over 3 year period $ 26 mn
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research Page 7
Outlook and valuation
A healthy deal pipeline, ramp-up of Sky deal in FY18E and breakeven in
mortgage business in Q1FY18 may drive growth, going ahead.
Consequently, we estimate FSL will report revenue, PAT CAGR of 5.5%,
10.5%, respectively, in FY17-19E with average EBITDA margins at 12.5%
in FY17-18E. FSL’s debt repayment plan is on track with net debt at
US$80.7 million as on March 2017. It could become debt free by FY19E.
We value FSL Ltd with a revised target price of | 45/share (9x FY19E EPS,
largely in line with its historical multiple for the last 10 years).
Exhibit 5: One year forward rolling EV/EBITDA
0
1000
2000
3000
4000
5000
6000
7000
Apr-09
Oct-09
Apr-10
Oct-10
Apr-11
Oct-11
Apr-12
Oct-12
Apr-13
Oct-13
Apr-14
Oct-14
Apr-15
Oct-15
Apr-16
Oct-16
Apr-17
|
EV 10 8 6 4 2
Source: Company, ICICIdirect.com Research
Exhibit 6: Valuations
Sales Growth EPS Growth PE EV/EBITDA RoNW RoCE
(| cr) (%) (|) (%) (x) (x) (%) (%)
FY16 3,240 6.8 3.8 7.6 10.2 7.7 12.9 11.7
FY17P 3,556 9.8 4.1 8.5 9.4 6.7 11.5 12.1
FY18E 3,659 2.9 4.4 6.2 8.9 6.0 11.0 12.1
FY19E 3,944 7.8 5.0 15.1 7.7 5.0 11.4 13.0
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research Page 8
Recommendation History vs. Consensus
0.0
20.0
40.0
60.0
80.0
100.0
120.0
0
25
50
75
100
Feb-17Nov-16Sep-16Jun-16Apr-16Jan-16Nov-15Sep-15Jun-15Apr-15Jan-15
(%
)(|)
Price Idirect target Consensus Target Mean % Consensus with BUY
Source: Bloomberg, Company, ICICIdirect.com Research
Key events
Date Event
Dec-13 The company successfully makes its third quarterly principal repayment of $11.25 million on its outstanding debt on December 31, 2013
Mar-14 The company successfully makes its fourth quarterly principal repayment of $11.25 million on its outstanding debt on March 31, 2014
Apr-14
The company reports in line quarter with 174 bps margin expansion for FY14 led by exiting lower margin domestic business. It reduces FY15E growth outlook to 6%
from 8% earlier.
Nov-14 FSL reports moderate growth during Q2FY15 with 94 bps YoY margin expansion. However, it lowers its FY15E guidance to 2-2.5% vs. 6% earlier
May-15 Reports weak Q4FY15 earnings as revenues, absolute EBITDA and PAT were below our estimates
Jun-15 Firstsource reports soft Q1FY16 earnings. Though revenues were above our estimates, absolute EBITDA and PAT were below
Oct-15
Reports strong Q2FY16 earnings, which were in line with our raised estimates.Revenues from operations grew 6.1% QoQ while constant currency revenues grew
3.2% QoQ
Mar-16
Firstsource Group USA, Inc, a wholly owned subsidiary of the company successfully made its fourth quarterly repayment of US$11.25 million on its outstanding debt
on March 31, 2016
May-16 Firstsource completes acquisition of ISGN's Business Process Outsourcing Division".
Jun-16
Firstsource Group US, Inc, a wholly owned subsidiary of the company successfully makes its fifth quarterly repayment of US$11.25 million on its outstanding debt
on June 30, 2016
Dec-16
Firstsource Group US, Inc, a wholly owned subsidiary of the company successfully makes its seventh quarterly repayment of US$11.25 million on its outstanding
debt on December 31, 2016
Jan-17 Firstsource Solutions and Sky UK sign contract for previously announced 10-year strategic partnership
Source: Company, ICICIdirect.com Research
Top 10 Shareholders Shareholding Pattern
Rank Name Latest Filing Date % O/S Position (m) Change (m)
1 RPG Enterprises 30-Sep-16 55.2% 373.98 0
2 ICICI Group 30-Sep-16 4.7% 32.08 0
3 Jhunjhunwala (Rakesh Radheshyam) 30-Sep-16 3.7% 25.00 +1.50
4 Goldman Sachs Asset Management International 30-Sep-16 2.7% 18.52 0
5 Dimensional Fund Advisors, L.P. 30-Nov-16 2.0% 13.37 0
6 Birla Sun Life Asset Management Company Ltd. 31-Dec-16 1.6% 10.78 +1.31
7 Steinberg Asset Management, LLC 30-Sep-16 1.6% 10.49 -0.01
8 Subramaniam (Rajesh) 9-Jan-17 0.2% 1.63 -0.32
9 Van Eck Associates Corporation 31-Dec-16 0.2% 1.51 -0.08
10 Mellon Capital Management Corporation 31-Dec-16 0.1% 0.77 +0.00
(in %) Sep-16 Dec-16 Mar-17
Promoter 55.35 55.16 54.89
Public 44.65 44.84 45.11
Others 0.00 0.00 0.00
Total 100.00 100.00 100.00
Source: Reuters, ICICIdirect.com Research
Recent Activity
Investor name Value ($m) Shares Investor name Value ($m) Shares
Jhunjhunwala (Rakesh Radheshyam) 0.91m 1.50m Franklin Templeton Asset Management (India) Pvt. Ltd. -0.28m -0.40m
Birla Sun Life Asset Management Company Ltd. 0.73m 1.31m Subramaniam (Rajesh) -0.20m -0.32m
Jain (Shalabh) 0.08m 0.13m Smith (Charles Miller) -0.05m -0.10m
Ponnappa (K M) 0.06m 0.08m Van Eck Associates Corporation -0.04m -0.08m
Malegam (Y H) 0.05m 0.08m Tyagi (Arun) -0.04m -0.07m
Buys Sells
Source: Reuters, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research Page 9
.
Financial summary
Profit and loss statement | Crore
FY16 FY17P FY18E FY19E
Total Revenues 3,240 3,556 3,659 3,944
Growth (%) 6.8 9.8 2.9 7.8
Employee expenses 2,172 2,383 2,452 2,633
Other Expenses 654 734 750 809
EBITDA 413 438 457 503
Growth (%) 8.5 6.0 4.4 9.9
Depreciation & Amortization 66 59 66 71
Other Income 9 3 3 3
Interest 52 45 33 19
PBT before Exceptional Items 294 337 362 416
Growth (%) 20.6 14.4 7.3 15.1
Tax 25 58 65 75
PAT before Exceptional Items 269 279 297 341
Exceptional items - - - 1
PAT before MI 269 279 297 342
Minority Int & Pft. from associates 0 (0) (0) (0)
PAT 269 279 297 342
Growth (%) 14.7 4.0 6.2 15.4
EPS 3.8 4.1 4.4 5.0
EPS (Growth %) 7.6 8.5 6.2 15.1
Source: Company, ICICIdirect.com Research
Cash flow statement | Crore
FY16 FY17P FY18E FY19E
Profit before Tax 294 337 362 416
Depreciation & Amortization 66 59 66 71
WC changes (45) (33) (12) (32)
Other non cash adju. 41 42 30 16
CF from operations 298 347 381 396
Capital expenditure (86) (71) (73) (79)
Δ in investments (4) - - -
Other investing cash flow (14) 3 3 3
CF from investing Activities (104) (68) (70) (76)
Issue of equity 12 - - -
Δ in debt funds (149) (213) (186) (212)
Dividends paid - - - 1
Other financing cash flow (71) (45) (33) (19)
CF from Financial Activities (207) (259) (219) (231)
Δ in cash and cash bank balance (13) 20 92 90
Effect of exchange rate changes - - - 1
Opening cash 80 68 88 180
Closing cash 68 88 180 269
Source: Company, ICICIdirect.com Research
Balance sheet | Crore
FY16 FY17P FY18E FY19E
Equity 673 673 673 673
Reserves & Surplus 1,752 2,031 2,328 2,669
Networth 2,425 2,705 3,001 3,343
Minority Interest 2 2 2 2
LT liabilties & provisions 43 43 43 43
Total Debt 905 692 506 293
Source of funds 3,376 3,442 3,552 3,681
Net fixed assets 133 145 152 160
CWIP 8 9 9 9
Goodwill 2,469 2,469 2,469 2,469
Other non current assets 269 269 269 269
Loans and advances 66 71 73 79
Current Investments 77 77 77 77
Debtors 304 321 331 358
Cash & Cash equivalents 68 88 180 269
Other current assets 272 304 313 338
Trade payables 88 107 110 119
Current liabilities 175 187 193 208
Provisions 27 17 18 19
Application of funds 3,376 3,442 3,552 3,681
Source: Company, ICICIdirect.com Research
Key ratios
(Year-end March) FY16 FY17P FY18E FY19E
Per share data (|)
EPS-diluted 3.8 4.1 4.4 5.0
Cash per share 1.0 1.1 1.1 1.1
BV 29.5 35.8 39.9 44.1
Operating Ratios (%)
EBITDA Margin 12.7 12.3 12.5 12.8
PBT Margin 9.1 9.5 9.9 10.6
PAT Margin 8.3 7.9 8.1 8.7
Return Ratios (%)
RoNW 12.9 11.5 11.0 11.4
RoCE 11.7 12.1 12.1 13.0
Valuation Ratios (x)
P/E 10.2 9.4 8.9 7.7
EV / EBITDA 7.7 6.7 6.0 5.0
Price to Book Value 1.3 1.1 1.0 0.9
EV / Net Sales 1.0 0.8 0.7 0.6
Mcap / Net Sales 0.8 0.7 0.7 0.7
Turnover Ratios
Debtor days 5 7 7 7
Creditors days 30 28 30 29
Solvency Ratios
Total Debt / Equity 0.4 0.3 0.2 0.1
Current Ratio 5.3 5.3 4.8 4.7
Quick Ratio 5.3 5.3 4.8 4.7
Debt / EBITDA 2.2 1.6 1.1 0.6
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research Page 10
o
ICICIdirect.com coverage universe (IT)
CMP M Cap EPS (|) P/E (x) RoCE (%) RoE(%)
(|) TP(|) Rating (| Cr) FY16 FY17P FY18E FY16 FY17P FY18E FY16 FY17P FY18E FY16 FY17P FY18E FY16 FY17P FY18E
Cyient (INFENT) 540 580 Hold 6,080 29.0 30.5 35.9 18.6 17.7 15.0 12.7 10.7 9.4 20.3 20.0 20.3 17.1 16.3 17.1
Eclerx (ECLSER) 1,379 1,300 Sell 5,685 87.9 86.1 92.6 15.7 16.0 14.9 10.6 10.7 9.6 42.6 34.8 34.2 33.5 28.5 26.7
Firstsource (FIRSOU) 39 45 Buy 2,582 3.8 4.1 4.4 10.2 9.4 8.9 7.7 6.7 6.0 11.7 12.1 12.1 12.9 11.5 11.0
HCL Tech (HCLTEC) 831 950 Buy 117,312 40.0 58.1 64.6 16.6 10.2 8.8 3.5 2.3 2.0 35.9 51.5 54.3 23.5 30.3 32.5
Infosys (INFTEC) 930 1,060 Buy 212,554 59.0 62.8 64.6 15.8 14.8 14.4 10.4 9.3 9.6 30.2 28.8 31.0 21.8 20.8 22.3
KPIT Tech (KPISYS) 128 140 Hold 2,547 14.1 10.6 11.0 9.1 12.0 11.6 5.4 7.0 6.6 23.7 16.3 16.3 20.4 15.4 12.8
Mindtree (MINCON) 442 485 Hold 7,422 35.9 24.9 29.1 12.3 17.7 15.2 8.4 9.1 8.2 31.1 21.1 23.9 25.2 16.0 18.0
NIIT Technologies (NIITEC) 427 450 Hold 1,530 45.8 39.2 44.1 9.3 9.8 9.7 2.4 2.2 1.8 30.5 27.0 27.2 17.6 13.6 13.9
Persistent (PSYS) 580 700 Buy 4,639 37.2 37.6 40.1 15.6 15.4 14.5 9.7 8.5 7.1 23.8 21.3 20.4 18.1 16.2 15.4
TCS (TCS) 2,290 2,400 Hold 448,542 122.9 133.4 135.0 18.6 17.2 16.9 13.7 12.6 12.4 42.2 38.0 40.9 33.1 29.7 32.2
Tech Mahindra (TECMAH) 438 525 Buy 43,042 31.7 33.6 40.4 13.8 13.0 10.8 9.0 9.1 7.5 25.5 23.6 25.3 21.7 18.6 19.8
Wipro (WIPRO) 494 500 Hold 121,676 36.1 35.2 34.1 13.7 14.0 14.5 9.9 8.7 8.7 19.6 17.3 15.9 19.1 15.7 14.1
Sector / Company
EV/EBITDA (x)
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research Page 11
RATING RATIONALE
ICICIdirect.com endeavours to provide objective opinions and recommendations. ICICIdirect.com assigns
ratings to its stocks according to their notional target price vs. current market price and then categorises them
as Strong Buy, Buy, Hold and Sell. The performance horizon is two years unless specified and the notional
target price is defined as the analysts' valuation for a stock.
Strong Buy: >15%/20% for large caps/midcaps, respectively, with high conviction;
Buy: >10%/15% for large caps/midcaps, respectively;
Hold: Up to +/-10%;
Sell: -10% or more;
Pankaj Pandey Head – Research [email protected]
ICICIdirect.com Research Desk,
ICICI Securities Limited,
1st Floor, Akruti Trade Centre,
Road No 7, MIDC,
Andheri (East)
Mumbai – 400 093
ICICI Securities Ltd | Retail Equity Research Page 12
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