Buy SIS; target of Rs 410: Motilal Oswal

Motilal Oswal's research report on SIS

SIS (SECIS)’s 2QFY26 revenue was up 15% YoY/5.9% QoQ at INR37.6b vs. our estimate of INR35.6b. Revenue growth was aided by ~5.7% growth in India security, whereas International Security/Facilities management posted a growth of 1.9%(CC)/5.9% QoQ. EBITDA margin came in at 4.5%, up 10bp YoY (vs. est. 4.7%). The margin for India Security was 5.3%, while the same for International Business was 3.3%, flat QoQ. Adjusted PAT stood at INR930m (flat QoQ). The net debt-to-EBITDA ratio stood at 1.03x (0.87x in 1Q). For 1HFY26, revenue/EBITDA grew by 14.2%/13.5% YoY. We expect revenue/EBITDA to grow 20.4%/23.1% YoY in 2HFY26. We reiterate our BUY rating on the stock with a TP of INR410, implying a 21% upside potential.

Outlook

We value SECIS using SOTP: 1) DCF for the India Security business (INR212), 2) an EV/EBITDA multiple of 7x (INR124) for the International Security business, and 3) DCF for the FM business (INR124) less net debt (INR47). Consequently, we arrive at our TP of INR410. We reiterate our BUY rating on the stock.