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Motilal Oswal Report
Quess Corp Ltd. delivered an in-line performance in Q3 FY23, with 21.2% YoY growth in revenue. The headcount addition was weak (~1,000 net) as a one-time bench in IT staffing for Q2 FY23 was dissolved in Q3 FY23. Ebitda margin at 3.3% showed a slower recovery.
Management indicated a weak macro environment. The demand for IT staffing remains under pressure on slow hiring. While we expect good growth to continue in the global technology services business in FY24 as well, overall revenue growth would ease on account of the normalization in the WFM business amid weakening macro.
We expect FY24/FY25 growth to be 19.7%/20.7%.
Quess Corp's Ebitda margin expanded by 10 bps to 3.3% (below our estimate), primarily due to cuts in selling, general and administrative spending. We expect a slow margin recovery in FY24 due to a continued burn in Foundit (Monster), slow growth amid weak macro hurting its ability to pass on the wage hikes, and a poor FY23 exit.
We expect FY24/ FY25 Ebitda margin of 3.9%/4.4%. Accordingly, we expect a profit after tax compound annual growth rate of 73% over FY23-25E on a low FY23 base (down 27% on poor margin performance).
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