Buy Firstsource Solutions; target of Rs 121: Anand Rathi

Anand Rathi's research report on Firstsource Solutions

FSL had $185m revenues, up 16% q/q, 26% y/y, scaling up fast, driven by BFS/mortgage (up 16% q/q, 53% y/y), CMT (up 26% q/q, 18% y/y) and Healthcare (up 8% q/q, down 2% y/y). BFSI (cyclical) and CMT (driven by normalization) may ease in FY22 but HPHS (augmented by PatientMatters) will likely accelerate, ensuring 6-7% growth in FY22. For FY21, guidance was raised to 16-17% CC (from 9-12%). The 10.7% EBIT margin (flat q/q, up 25bps y/y) was steady on higher wages in BFS, likely to sustain.

Outlook

We raise our FY21e/FY22e earnings 4%/6%, and target to Rs121 (15x FY23 EPS), earlier Rs90.