SIS Q2 Results Review - Superior Execution; Improving Outlook To Support Growth: Axis Securities

Axis Securities Report

In Q2FY24, SIS Ltd. reported revenue at Rs 3,074 crore, registering a growth of 3.3% on a QoQ basis. The company’s consolidated Ebitda for the quarter grew by 3.9% QoQ to Rs 145 crore, owing to the rebound of international business and strong demand for Indian security solutions.

It reported a net income of Rs 76 crore, which declined by 15.9% QoQ. Security Services in India exhibited an encouraging growth of 5.9% QoQ, driven by the rising demand for security guards and mandatory checkups.

Outlook

From a long-term perspective, we believe SIS is sorting out client-specific engagement in verticals such as International business. However, rising concerns over the prospects of large economies along with prevailing business and demographic constraints pose uncertainties over the company’s short-term growth rates.

Valuation and recommendation

We recommend a 'Buy' rating on the stock and assign a 16 times price/earning multiple to its FY25E earnings of Rs 29.7/share to arrive at a target price of Rs 475/share, implying an upside of 15% from the current market price.

Key risks to our estimates and target price

• The demand environment is uncertain because of the potential threat of recession in the world’s largest economies.

• The rising subcontracting cost and cross-currency headwinds may impact the company’s operating margins negatively.

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