Buy SIS; target of Rs 450: Motilal Oswal

Motilal Oswal's research report on SIS

SIS (SECIS)’s 1QFY26 revenue was up 13.4% YoY/3.5% QoQ at INR35.4b vs. our estimate of INR34.5b. Revenue growth was aided by 18.9% YoY CC growth in Facility Management, whereas India Security/International Security posted 9.2%/12.1% growth YoY. EBITDA margin came in at 4.3%, down 10bp YoY (vs. est. 4.6%). India Security margin was flat at 5.4%, while International Business margin was down 100bp QoQ at 3%. Adjusted PAT stood at INR929m (up 12.7%/ 44% QoQ/YoY). The net debt-to-EBITDA ratio stood at 0.87x (0.71x in 4Q). For 1QFY26, revenue/EBITDA/ adj. PAT grew by 13.4%/10.7%/44.7% YoY. We expect revenue/EBITDA/adj. PAT to grow 8.0%/13.4%/65% YoY in 2QFY26. SECIS remains the largest security solutions provider in India, leading the integration of technology in the traditionally manpower-driven industry. We reiterate our BUY rating on the stock with a TP of INR450, implying a 16% upside potential.

Outlook

We keep our estimates largely unchanged. We value SECIS at INR450 (16% potential upside), assigning a 7x forward EV/EBITDA multiple to its international business and DCF to its Indian business. Reiterate BUY.