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Axis Securities Report
In Q2FY24, SIS Ltd. reported revenue at Rs 3,074 crore, registering a growth of 3.3% on a QoQ basis. The company's consolidated Ebitda for the quarter grew by 3.9% QoQ to Rs 145 crore, owing to the rebound of international business and strong demand for Indian security solutions.
It reported a net income of Rs 76 crore, which declined by 15.9% QoQ. Security Services in India exhibited an encouraging growth of 5.9% QoQ, driven by the rising demand for security guards and mandatory checkups.
Outlook
From a long-term perspective, we believe SIS is sorting out client-specific engagement in verticals such as International business. However, rising concerns over the prospects of large economies along with prevailing business and demographic constraints pose uncertainties over the company's short-term growth rates.
Valuation and recommendation
We recommend a 'Buy' rating on the stock and assign a 16 times price/earning multiple to its FY25E earnings of Rs 29.7/share to arrive at a target price of Rs 475/share, implying an upside of 15% from the current market price.
Key risks to our estimates and target price
The demand environment is uncertain because of the potential threat of recession in the world's largest economies.
The rising subcontracting cost and cross-currency headwinds may impact the company's operating margins negatively.
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