Buy Quess Corp; target of Rs 745: Motilal Oswal

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26 Aug, 2025 12:21

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QUESS’ 3QFY21 result witnessed a marginal miss on operations. Adjusted for lockdown impact in the IFM Food Services and Excelus businesses, underlying revenue and EBITDA were resilient. It is now a net cash company (INR260m), helped by healthy cash conversion (OCF-to-EBITDA of 80%). n As the economy opens up gradually, we expect a pick-up in General Staffing across companies. Continued demand for IT staffing should further aid growth and margin. The CLM/BPM business saw healthy revenue growth, with a rapid recovery in activity. n We expect QUESS to deliver 30% revenue growth in FY22E after a flat FY21 due to the COVID-19 impact. A gradual increase in margin (80bp YoY in FY22E on improving efficiency and shift towards higher margin IT Staffing business) and lower net interest expense should help it deliver 34% EPS CAGR over FY20-23E. n Over the medium term, we expect QUESS to be the biggest beneficiary of the recent labor law reforms. Our target price of INR745 per share implies a multiple of 17x FY23E EPS. Reiterate Buy.

We welcome corrective steps undertaken by the new management to address some investor concerns. The improvement in cash conversion/RoE should drive a re-rating. Our TP implies 17x FY23E EPS

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