Reduce Firstsource Solutions; target of Rs 350: Emkay Global Financial

Emkay Global Financial' research report on Firstsource Solutions

firstsource (fsol) reported a largely in-line operating performance in q2. revenue grew 2.3% qoq to usd265mn (2.0% cc), a tad below our estimate. ebitm expanded by 20bps qoq to 11.5%, marking the 4th consecutive quarter of margin expansion, though a tad below our estimated 11.6%. fsol signed four large deals (each with acv exceeding usd5mn; two representing additional business from the top 5 accounts) and added 10 new logos in q2 (including four strategic). it added 19 strategic logos between q2fy25 and q1fy26; of these, 13 have already achieved usd5mn relationship size on a ttm basis and four from q1 still have ramping-up runway. fsol retained its fy26 revenue growth guidance of 13-15% in cc terms (excluding pdc’s acquisition, which is pending regulatory approval), implying a cqgr of 3.3-5.6% over q3- q4, and ebitm guidance of 11.25-12%. revenue growth is set to accelerate in h2, fueled by revenue from the healthcare bpaas deal, phased ramp-ups of large deals, a robust deal pipeline (>usd1bn acv), and healthy headcount additions made in q2 which would support potential demand. we largely retain our fy26-28e eps (<1% change), factoring in the in-line q2 results.

Outlook

we retain reduce, with an unchanged tp of rs350, at 24x sep-27e eps.