HDFC Securities' research report on Teamlease Services
Teamlease registered strong recovery in growth (+13% QoQ), while the margin performance was below expectation. A sharp recovery in core staffing (+13.8% QoQ. 91% of revenue) was led by recovery in hiring activity in stressed verticals (Manufacturing and Infra) and strong festive demand (Consumer Durables and BFS). The core staffing headcount jumped 8.5% QoQ, led by core/NETAP additions (+4.8/21.1% QoQ) and have reached pre-COVID levels. Core Staffing margin contracted 17bps QoQ to 1.9% (estimate of 2.0%) due to a high proportion of fixed mark-up associates (festive demand), but will improve with growth and improving productivity. The specialised staffing growth was muted (+2.6% QoQ) but margin improved to 10.6% (+145bps QoQ).
Outlook
We increase our multiple to 33x (30x earlier) to factor in growth recovery in core business and increase EPS by +3.1/2.6% for FY22/23E. Our target price of Rs 3,170 is based on 33x Dec-22E EPS (5Y average P/E of ~35x). The stock is trading at a P/E of 37.6/27.3x FY22/23E. Maintain BUY.
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