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Security & Intelligence Services - Q1FY21 Company Update - ICICI Securities

Posted On: 2020-08-01 22:11:49

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.

Valuation & Outlook

With its leadership positioning in majority of key verticals, SIS should be able to partake in consolidation opportunities within the security and facility management space (fiscal positioning net debt/EBITDA 1.31x). Strong focus on cost optimisation and prudent provisioning should ameliorate margin trajectory, going forward. OCF/EBITDA conversion was also healthy at 81%. DSO day increased by six days; with gradual unlocking of economies, the management expects DSO to be in-line with historical trends. 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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Shares of Security and Intelligence Services (India) Ltd was last trading in BSE at Rs.359 as compared to the previous close of Rs. 342.25. The total number of shares traded during the day was 11675 in over 923 trades.

The stock hit an intraday high of Rs. 363.55 and intraday low of 342.2. The net turnover during the day was Rs. 4164992.

Source: Equity Bulls

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