Mehabe score: 5 G Factor: 3 Piotski Score: 7 The stock has a rating OBSERVE & HOLD. The mehabe team score is reflective of its fundamental and technical merits. A rating above 8 is considered good buy. The stock has a G-Factor of 3 and Piotski score of 7.
Description
Firstsource Solutions Limited is a leading player in the Business Process Management (BPM) industry. Part of the RP-Sanjiv Goenka Group, Firstsource provides bespoke services and solutions to its customers across Banking and Financial Services, Healthcare, Communications, Media and Technology and other diverse industries. It serves to 100+ global clients from 36 delivery centres across four geographies – US, UK, Philippines and India.
Main Points
Banking & Financial Services Vertical (52% of revenues) #
Firstsource offers a range of solutions for commercial and retail banking clients & operates across segments including Retail & SME Banking, Mortgages, collection & recoveries, complaints & remediation, commercial finance & Fintech. It works with leading lenders, credit card issuers & mortgage services in US.Site:FSLMain Symbol:FSL
Stock trades at 204.0, above its 50dma 179.21. It also trades above its 200dma 125.04. The stock remains bullish on techicals
The 52 week high is at 242.85 and the 52week low is at 44.95
Price Chart
P/E Chart
Sales and Margin
Strengths
– has been maintaining a healthy dividend payout of 48.46%
Weakness
– Stock is trading at 5.08 times its book value
-The company has delivered a poor sales growth of 9.56% over past five years.
– has a low return on equity of 13.33% for last 3 years.
– might be capitalizing the interest cost
Competition
– The industry trades at a mean P/E of 34.4x. Happiest Minds trades at the industry’s max P/E of 133.64x. FSL trades at a P/E of 39.4x
– Industry’s mean G-Factor is 3.4 while the mean Piotski score is 9.0. FSL has a G-Factor of 3 and Piotski scoreof 7.
– Average 1 month return for industry is 19.1%. The max 1- month return was given by Happiest Minds: a return of 46.18 %
Quarterly Results
Sales for period ended Jun 2021 is Rs 1485.0 cr compared to Rs 1062.0 cr for period ended Jun 2020, a rise of 39.8%
Operating Profits reported at Rs 238.0 cr for period ended Jun 2021 vis-vis 167.0 for period ended Jun 2020 .
Operating Margins expanded 30.2 bps for period ended Jun 2021 vis-vis Jun 2020 .
The EPS for Jun 2021 was Rs 1.93 compared to Rs 0.67 for previous quarter ended Mar 2021 and Rs 1.28 for Jun 2020
Profit & Loss Statement
Profit&Loss Comments
Company reported sales of Rs 5501.0 cr for period ended TTM vis-vis sales of Rs 5078.0 cr for the period ended Mar 2021, a growth of 7.7%. The 3 year sales cagr stood at 12.9%.
Net Profit reported at Rs 408.0 cr for period ended TTM vis-vis sales of Rs 362.0 cr for the period ended Mar 2021, rising 11.3%.
Company recorded a Net Profit CAGR of 2.6% over the last 3 years
Balance Sheet Statement
Cash Flow Statement
Cash Flow comments
CashFlow from operating activities was positive.
CashFlow from operating activities: Rs 976.0 cr for period ended Mar 2021 vis-vis Rs 410.0 cr for period ended Mar 2020
Sales Growth
Profit Growth Statement
Profit Growth Statement
Stock Price CAGR
Return of Equity
General Comments
– The company has had stable/constant Return on Equity (RoE) metric. The RoE on Last Year basis was 13.0% compared to 13.0% over the last 3 Years. – The stock has given a return of 336% on a 1 Year basis vis-vis a return of 41% over the last 3 Years. – The compounded sales growth on a TTM bassis is 24% vis-vis a compounded sales growth of 13% over the last 3 Years. – The compounded profit growth on a TTM basis is 8% vis-vis a compounded profit growth of 4% over the last 3 Years.
Ratios
Shareholding Pattern
– FII shareholding has remained largely constant. The Jun 2021 fii holding stood at 12.06% vis-vis 10.45% for Mar 2021 – Public shareholding has fallen for the period ended Jun 2021. The Jun 2021 public holding stood at 16.91% vis-vis 19.08% for Mar 2021
Conclusion
– has been maintaining a healthy dividend payout of 48.46% – Stock is trading at 5.08 times its book value
-The company has delivered a poor sales growth of 9.56% over past five years.
– has a low return on equity of 13.33% for last 3 years.
– might be capitalizing the interest cost
Fundamentally, the stock remains weak on business fundamentals. Weak near term results have dampened and questioned business drivers. We suggest to wait for a upturn in business performance.
Technically, the stock trades above its 50 DMA 179.21 and is trading at 204.0 It has shown near term bullish momentum contrary to business fundamentals. We suggest to observe price action. However as investors, who like to avoid timing the markets, we suggest to avoid the stock
