Neutral Quess Corp; target of Rs 410: Motilal Oswal

Motilal Oswal's research report on Quess Corp

QUESS delivered a weak performance in 4QFY23, with 17.1% YoY growth in revenue. The headcount addition was good at ~6k net. The EBITDA margin at 3.4% was in line with expectations. Margin expansion was negatively impacted due to ongoing investments and headwinds in IT Staffing. The management indicated a weak macro environment. The demand for IT staffing remains under pressure on slow hiring. We expect FY24 growth to remain slower, due to macro headwinds. IT staffing will continue to be adversely impacted from the slowdown in IT Services space. With growth expected to rebound in FY25, we estimate a revenue CAGR of 17.5% over FY23-25.

Outlook

Though QUESS should benefit from medium-term tailwinds of formalization and labor reforms, the growth has already been factored into the valuations. We reiterate our NEUTRAL stance due to full valuations, taxation concerns, and weak macro. Our TP of INR410 implies 11x FY25E P/E.