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Motilal Oswal Report
Quess Corp Ltd. delivered a 15.6% YoY growth in revenue, slightly below our estimate of 16.5%. The headcount addition was strong at ~14,000 net. The Ebitda margin at 3.3% was below our expectations of 3.5%. The margin was negatively impacted due to ongoing investments and headwinds in workforce management.
The management indicated good demand in banking, financial services and insurance, manufacturing, and telecom, while the demand for fast moving consumer goods and IT is expected to remain weak.
Quess Corp hired an additional 14,000 individuals in Q1 FY24. The company indicated that it made this hiring in anticipation of a strong festive demand in the next two quarters.
This move provides good visibility for near-term growth and we estimate a revenue compound annual growth rate of 17.6% over FY23-25.
Though Quess Corp should benefit from medium-term tailwinds of formalization and labor reforms, the growth has already been factored into the valuations.
We reiterate our 'Neutral' stance due to full valuations, taxation concerns, and weak macro. Our target price of Rs 440 implies 12 times FY25E price/earnings.
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