Buy Firstsource Solutions; target of Rs 84: ICICI Direct

ICICI Direct's research report on Firstsource Solutions

Firstsource Solution (FSL) reported a healthy set of Q2FY21 numbers. Dollar revenues increased 13.6% QoQ led by healthy growth in top client, 15% QoQ growth in BFS and 31.8% QoQ growth in communication, media and technology (CMT). In rupee terms, revenues increased 20.6% YoY, 11.8% QoQ. EBITDA margins increased 10 bps QoQ to 15.8%. Short-term debt declined from Rs 834. 1 crore to Rs 588.5 crore. FSL has guided 9-12% YoY growth (up from earlier guidance of 6-10%) in FY21E revenues in constant currency terms and operating margins in the range of 11.0-11.5%.

Outlook

Based on this, we revise our revenue, EPS estimates upwards, prompting us to maintain BUY on the stock with a revised target price of Rs 84/share.