Buy Firstsource Solutions; target of Rs 125: Emkay Global Financial

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26 Aug, 2025 12:21

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Emkay Global Financial's report on Firstsource Solutions

FSOL is confident of delivering revenue growth in low to mid-teens over the next three years. It has accelerated investments into sales and account management and solutioning capabilities in the last 1.5 years, driving better client mining and new logos acquisition. BFS, which accounts for over 50% of FSOL’s total revenue, led growth in 9MFY21 with a strong performance in the mortgage business (>2x YoY). Rising interest rates in US may weigh on mortgage origination (refinancing mainly) growth; however, traction in UK retail & commercial banks, mortgage servicing, and collection would support growth, in our view. After a sharp fall in Q1, CMT bounced back strongly in the last two quarters with a solid volume recovery and market share gain in the top client (back to growth in Q3; down 10% in 9M). PatientMatters acquisition should augment recovery in healthcare from Q4FY21.

Outlook

We expect FSOL to deliver ~19% earnings growth over FY20-23E. We maintain Buy with a TP of Rs125 at 15x FY23E earnings, considering a sustainable improvement in the revenue growth trajectory with stable margins and strong cash generation.

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