ICICI Direct recommended buy rating on Firstsource Solutions with a target price of Rs 40 in its research report dated August 09, 2017.
ICICI Direct's research report on Firstsource Solutions
Firstsource’s results were largely in line with our expectations. Revenues from operations declined 1.6% QoQ to Rs 877.7 crore, lower than our flat growth and Rs 892.3 crore estimate At 11.5%, EBITDA margins expanded 40 bps QoQ and were above our 10.8% and 30 bps decline estimate, mainly on account of lower employee cost (down 3.7% QoQ) Reported PAT of Rs 65.4 crore was in line with our Rs 65.5 crore estimate mainly on account of better-than-expected EBITDA margin During the quarter, the company successfully made its quarterly principal repayment of $11.25 million. Net long term debt was at US$76.2 million as on June 30, 2017.
Impact of exit from the domestic business would be visible on the revenue front flowing downwards for FY18E. However, health of underlying business stays good with turning profitability in ISGN, ramp-up of Sky deal and traction in healthcare space to support earnings, going ahead. Further, FSL’s debt repayment plan is on track with net debt at US$76.2 million as on June 30, 2017. It could become debt free by FY19E. Above mentioned positive triggers could lead to improvement in margin profile, going ahead. We arrive at a revised target price of Rs 40/share for FSL.
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