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Buy TeamLease; target of Rs 2000: ICICI Direct

ICICI Direct is bullish on TeamLease has recommended buy rating on the stock with a target price of Rs 2000 in its research report dated June 10, 2020.

June 15, 2020 / 08:02 AM IST
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ICICI Direct's research report on TeamLease

TeamLease’s Q4FY20 revenues declined 1.6% QoQ (up 14.3% YoY) to Rs 1330.3 crore (vs. our Rs 1318 crore estimate). Revenues from general staffing declined 1.7% sequentially to Rs 1195 crore, specialised staffing grew 1.8% QoQ to Rs 106 crore while HR services declined 7.3% QoQ to Rs 28 crore. EBITDA margins declined 53 bps QoQ to 1.5% (vs. our expectation of 2.1%). However, adjusting for provisions of Rs 6.2 crore, EBITDA margins were at 1.9%, lower than our estimates, mainly due to losses in HR services. In the current quarter, the company has taken one time non-cash charge of MAT credit to move to new tax regime. This move will enable the company to improve its cashflow as under the new tax regime the company will get benefits of 80 JJA but will not have to pay MAT.


TeamLease’s general staffing business continues to be on a strong footing. Going ahead, a revival in volume growth & margin improvement would lead to improved FY22E performance. The company is taking initiatives to improve margins by cutting low margin telecom contracts, reducing core employees, improving PBT growth. In addition, the company’s cashflow is expected to improve led by lower tax outgo and efficient working capital management. Hence, we upgrade the stock from HOLD to BUY with a revised target price of Rs 2000.