Hold Security and Intelligence Services; target of Rs 345: ICICI Direct

ICICI Direct's research report on Security and Intelligence Services

Security and Intelligence Services (SIS) reported a revenue fall of 1.9% QoQ with Indian security business, facility management down 7.2%, 14.6%, QoQ, primarily due to volume reduction within retail, entertainment & hospitality clients. International business grew 3.5% QoQ in constant currency (CC) terms. SIS, being an essential service provider, faced minimal interruption in its business in terms of supply-side issues (within India Security Services business, 98% of headcount was available). The company also provided Rs 54 crore in provisioning for doubtful debts, credit notes. Gross margins were broadly stable across segments. SIS believes the current tough environment provides a ripe opportunity to gain market share both in terms of organic (as customers prefer high quality vendors), inorganic means (consolidation of vendors), suggesting significant headroom for growth.

Outlook

Growth should stabilise, going forward, considering the gradual unlocking of economy, though margin execution, quality of earnings, improved collection and SIS’ differentiated inorganic strategy will be key upside catalysts in the near term. We maintain HOLD with a revised DCF based target price of Rs 345.

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