Buy Polaris Consulting & Services; target Rs 240: Prabhudas

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26 Aug, 2025 12:21

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Prabhudas Lilladher's research report on Polaris Consulting & Services

Polaris Consulting & Services’ (POL) Q1FY16 operational performance was better than PLe / consensus expectation. In our upgrade note (Restructured for growth, but not in price, March 16, 2015), we highlighted new initiatives undertaken by the management to translate into improved revenue momentum in FY16. Retain ‘BUY’. Q1FY16 results – Good operational performance: Polaris’ Q1FY16 results were above expectation. Revenue for the quarter grew by 6.2% QoQ to Rs4,958m (PLe: Rs4,769m, Cons.: Rs4,814) in INR terms, and 1.3% QoQ in USD terms to $76m (PLe: $75.2m, Cons.: $75.9m). EBITDA margins expanded by 210bps to 12.9% (PLe: 11.0%, Cons.: 10.9%) due to pyramid rationalization and cost saving. EPS for the quarter grew by 3.4% QoQ to Rs3.75 (PLe: Rs3.77, Cons.: Rs3.78).

Three pronged investment strategy and focus areas: Management highlighted three key areas of investment strategy to drive growth – 1) Digital Solutions. 2) Deepening footprint in key accounts. 3) Acquiring new clients in Tier-2 space and chasing business from captives of large global clients. The key focus areas for proper execution being – 1) Engagement with associates to bring down attrition level. 2) Cost Optimization 3) Improving fulfilment through sales and delivery process. We expect these new measures taken by management totranslate into ~150bp margin improvement over next two years.

Valuation and Recommendation - Retain “BUY” with TP of Rs 240: Management has completed its restructuring and investment. The only risk being proper execution. We expect improved revenue momentum and margin improvement for FY16. Reiterate our “BUY” rating with a TP of Rs240," says Prabhudas Lilladher research report.

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