Buy Firstsource Sol; target of Rs 50:Axis securities

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Axis securities's research report on Firstsource SolFirstsource’s (FSOL) Q3 revenue growth (2% QoQ in constant currency) was impacted dueto Chennai floods (excluding Chennai, 4% QoQ). Chennai impacted EBIT margin by ~50 bps. Management expects EBITDA margin to improve by 30-40 bps and net margin to improve by 70-80 bps in FY16.Deal pipeline remains healthy and sets the base for a strong FY17 Q3 saw deal wins of USD 7mn. Deal pipeline stood at USD 370 mn (vs. USD 500 mn in Q2) due to delay in decision making in 4 large deals. Management stated demand environment continues to be good in key growth engines of Healthcare (payer side) and Customer Management. Banking segment in UK has also seen improvement.We factor in ~11% USD revenue growth and ~120 bps improvement in margin for FY17, driven by benefits from ramp-up in Healthcare vertical and transaction/outcome-based services. Our FY16E/FY17E EPS stand at Rs4/Rs 5. Maintain BUY with TP of Rs 50 (10x FY17E), which implies 34% upside from CMP of Rs 37. The stock trades at ~10x/8x FY16E/17E EPS.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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