Religare's research report on Firstsource SolWe interacted with the FSOL management and key takeaways are: (1) vendor consolidation in a certain process by a large US account to effect growth in FY17, (2) margin gains to continue in FY17, and (3) revenue growth to sustain at 11%+ (incl. ISGN) in FY17. We see headwinds to organic growth from vendor consolidation and cut our FY17/FY18 EPS estimates by 8.1%/5.2%, leading to a Mar’17 TP of Rs 50 (Rs 55 earlier). Maintain BUY as FSOL’s cash generation and valuation profile remain attractive, though a re-rating would hinge on better execution.While the stock remains cheap on an FCF basis, we acknowledge that execution has been mixed. Loss of potential accounts to vendor consolidation is likely to derail a P/E re-rating, at least in the near term. We maintain BUY as we see value (19% FY17E FCF yield); however consistent earnings delivery remains the key for a re-rating. We lower our EPS estimates for FY17/FY18 by 8.1%/5.2% and cut our Mar’17 TP to Rs 50 (Rs 55 earlier), set at 9x one-year forward P/E.For all recommendations, click here Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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