Inventurus Knowledge Solutions Ltd., a recently listed IT outsourcing firm, received a 'hold' rating on its stock as Jefferies initiated coverage. It placed a target price of Rs 1,575 per share.
The brokerage expects the company to achieve a 14% compounded annual growth rate in dollar revenues in two years to $412 million, driven by increasing outsourcing and integrated offerings. This, combined with improving operating margins and debt reduction, should support a 34% earnings per share growth.
However, with pricey valuations at a 50-90% premium to peers, the upside to IKS stock is limited, Jefferies said in a note.
Inventurus Knowledge Solutions offers tech-enabled outsourcing solutions to US-based healthcare providers to help reduce their operating costs. As of December, the company has over 750 clients. It delivers its services from India, US, Canada and Australia.
Jefferies said spending in this space will grow 8% annually to $323 billion by 2028. Low barriers to entry may keep the market fragmented.
Margin Expansion
The brokerage said Inventurus Knowledge Solutions is likely to expand its Ebitda margins by five percentage points in FY25 to 29%, mainly due to lower subcontracting costs.
"We expect its margins to expand further by 470 bps to 33% by FY27, driven by inherent non-linearity in IKS' operations and ongoing offshoring of AQuity's operations," the note said.
This, along with deleveraging of balance sheet will lower interest costs over two years, which in turn should spur earnings growth further to 34% CAGR during the period — the highest among its peer set.
Inventurus Knowledge Solutions shares closed 12% lower at Rs 1,447 on Monday. The stock has declined 26% since market debut in December.
Essential Business Intelligence, Continuous LIVE TV, Sharp Market Insights, Practical Personal Finance Advice and Latest Stories — On NDTV Profit.
