INSUBCONTINENT EXCLUSIVE:
Religare Securities has a buy call on TeamLease Services with a target price of Rs 2,721.
The current market price of TeamLease Services is
Rs 2,250.
Time period given by the brokerage is one year when TeamLease Services price can reach the defined target.
Investment
rationale:TEAM enjoys leadership position in the highly fragmented flexi-staff industry commanding a market share of 6 per cent
It is likely to benefit from increase in penetration of flexi-staff in India, shift from unorganized to organized players and higher GDP
Further, TEAM's recent acquisitions to foray into new verticals and its value added services are likely to aid growth for the company
We expect TEAM's revenue to grow at 20 per cent CAGR over FY17-20E.
The flexi-staffing business is traditionally a low margin business and
hence, TEAM has to depend on operational efficiencies to improve margins
The company has been able to improve margins significantly over FY12-17 backed by improvement in staffing productivity
We expect EBITDA to grow at 40.2 per cent CAGR over FY17-20E driven by higher revenue growth and 80bps margin improvement on account of
increase in productivity and its recent entry into high margin business.
TEAM will benefit from Section 80JJAA deduction of the Income Tax
Act which pertains to employment generation
We have estimated 0 per cent tax rate for the company for the next three years
We expect 2.1x jump in profits on the back of higher revenue growth and improvement in margins.
