TeamLease
10 November 2020
2QFY21 Results Update | Sector: Others
TeamLease
Buy
Estimate change
TP change
Rating change
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
Financials & Valuations (INR b)
Y/E Mar
2020 2021E
Sales
52.0
50.2
EBIT Margin (%)
1.3
1.6
PAT
0.8
0.9
EPS (INR)
48.9
53.8
EPS Gr. (%)
-14.7
10.0
BV/Sh. (INR)
334.6 388.4
Ratios
RoE (%)
15.0
14.9
RoCE (%)
5.8
13.0
Payout (%)
0.0
0.0
Valuations
P/E (x)
48.1
43.7
P/BV (x)
7.0
6.1
EV/EBITDA (x)
43.2
35.3
Div Yield (%)
0.0
0.0
TEAM IN
17
41.3 / 0.5
2908 / 1421
-2/18/-20
67
CMP: INR2,418
Optimistic outlook
TP: INR2,700 (+12%)
Stability to come in 3QFY21
The General Staffing headcount remained flat on a sequential basis and was
better than our expectation. Impressively, realizations remained stable
despite the pressure on markups in the industry. Furthermore, FTE
productivity improved to 300, contributing to margin expansion during the
quarter.
Ongoing restructuring in the lagging businesses is a key positive and should
unlock management bandwidth. With the management optimistic on the
prospect of growth recovery, we expect a good rebound in the General
Staffing headcount over the next two quarters, with an FY21 exit to be
better v/s FY20. Healthy cash conversion is another key positive.
Over the medium term, as both the central and state governments look
forward to liberalizing and formalizing the labor markets, TeamLease should
be among the biggest direct beneficiaries.
Our estimates remain largely unchanged. Our TP of INR2,700 implies 32x
FY22E EPS. Reiterate
Buy.
TeamLease reported revenue / EBITDA / adj. PAT growth of -11%/-6%/7%
YoY (v/s our estimate of -12%/0%/-3%). For 1H, the company reported
revenue / EBITDA / adj. PAT growth of -10%/0%/-1%.
Overall revenue was slightly ahead of our estimates. General Staffing
revenues were flat QoQ (better than expectations) and in line with
headcount movement.
Revenue from Specialized Staffing was resilient (~2% QoQ decline), while
revenue from other HR services declined (~12% QoQ), as the company
undergoes a planned exit from some of these service lines.
Overall EBITDA margins declined ~20bp QoQ, but improved YoY.
Within segments, General Staffing and Specialized Staffing continue to
improve on profitability, driven by business performance and cost
optimization.
Realizations in General Staffing remained stable despite markup pressure in
the industry.
While EBITDA was 6% below our estimates, higher other income drove PAT
ahead by 11% (v/s our expectations).
Management expects positive growth momentum in 3Q and 4Q, although
this would be nowhere near pre-COVID levels. However, festival demand
would not be as large as it was in earlier periods.
The Manufacturing and Auto industries are showing early signs of recovery,
reflected in the company’s NETAP headcount.
2022E
65.2
1.9
1.4
82.9
54.0
471.3
19.3
17.3
0.0
28.4
5.0
24.2
0.0
Marginal beat on revenues
Shareholding pattern (%)
As On
Promoter
DII
FII
Others
Sep-20
40.0
14.5
40.0
5.5
Sep-19
40.3
7.7
44.6
7.4
Jun-20
40.0
14.5
40.0
5.5
FII Includes depository receipts
Key highlights from management commentary
Mukul Garg – Research analyst
(Mukul.Garg@MotilalOswal.com)
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
Investors are advised to refer through important disclosures made at the last page of the Research Report.
10 November 2020
1
Heenal Gada – Research analyst
(Heenal.Gada@MotilalOswal.com)