Buy SIS; target of Rs 480: Motilal Oswal

Motilal Oswal is bullish on SIS has recommended buy rating on the stock with a target price of Rs 480 in its research report dated October 29, 2024.

Broker Research

October 31, 2024 / 12:33 IST

Buy

Motilal Oswal's research report on SIS

SIS (SECIS)’s 2QFY25 revenue was up 6.3% YoY/4.4% QoQ at INR32.68b, largely in line with our estimate of INR34.51b. Growth was led by Security Solutions – International business (up 5.6% QoQ/7.0% YoY). EBITDA margin came in at 4.4% (vs. est. 5.0%), down 30bp YoY. Margin for India Security contracted 20bp YoY to 5.5%, while the same for International Business contracted 70bp YoY due to the loss of certain high-margin contracts during the previous year. Consolidated adj. PAT stood at INR688m (down 8.6% YoY), below our estimate of INR1,161m, on account of higher ETR and interest expense. For 1HFY25, revenue grew 5.8% while EBITDA/PAT declined 0.5%/19.3% vs. 1HFY24. We expect revenue/EBITDA/PAT to grow 12.4%/42.8%/8.8x YoY (owing to low base) in 2HFY25. We reiterate our BUY rating on the stock with a TP of INR480, implying 25% potential upside.

Outlook

We value SECIS using SOTP: 1) DCF for the India Security business (INR291), 2) an EV/EBITDA multiple of 8x (INR130) for the International Security business (in line with global peers), and 3) DCF for the FM business (INR113) less net debt (INR106). Consequently, we arrive at our TP of INR480. We reiterate our BUY rating on the stock.

For all recommendations report, click here