BUY FIRSTSOURCE SOLUTION (532809)
smart profit
CMP: 13
Target: 25 in 7 months
Formerly known as ICICI OneSource, incorporated in 2001, Firstsource Solutions Limited provides a range of business process outsourcing services.
It offers business process management services to the banking, financial services and insurance (BFSI); telecommunications and media; and healthcare industries. Firstsource has a “rightshore” delivery model with operations in India, U.S., UK and Philippines.
Firstsource Recognized with Top Honors at the International Quality and Productivity Council (IQPC) Conference. About 40% of the revenue comes from its healthcare vertical catering mainly to US markets. The Company works with more than 1000 clients. 7 of the top 10 clients have grown during the quarter. It has added 7,819 employees increasing its strength to 31,872 employees in this Fiscal year.
The company that managed to get RP-SP Goenka group as promoters on board in FY13 saw its sequential numbers impacted as it plans of restructuring the company to profitable growth was put in action. FSL repaid Rs.1422 crore (including redemption premium) worth of FCCB in Dec’12. Thus, reducing the current gross debt levels to Rs.1380 crore (net Rs.1290 crore). Currently, FSL is generating cash on quarterly run-rate of Rs.66 crore (Approx.). The company is pretty confident of servicing these outflows through internal cash generation and will be debt free company by 2016-17.
Fiscal 2013 revenues of INR Rs 2,818.5 crore, Y-o-Y growth of 25.0%; Operating EBIT of INR 191.2 crore, Y-o-Y up by 99.5%, PAT (profit after tax) of INR 146.6 crore, Y-o-Y up by 136.3%.
Rupee depreciation from 52 to 60 will benefit the company’s profitability. Ace investor Rakesh Jhunjhunwala picked up nearly 4 per cent stake for an estimated Rs 25 crore from private sector lender ICICI Bank and others further boosting the company. A total of 2.5 crore shares were acquired by Jhunjhunwala, as per the bulk deal information with stock exchanges.
With healthy pipeline, Rupee depreciating & better than expected execution capabilities, we recommend strong BUY rating on the stock with a price target of Rs 25 within 7 months.