Motilal Oswal Sees Potential Upside Of 38% From This Mid-Cap Stock

A leading brokerage firm, Motilal Oswal sees a potential upside of nearly 38 per cent from SIS Limited. The brokerage feels that the share price of the company will rally from Rs 376 to Rs 520, set as the target price for the overall margins will normalize.

SIS (SECIS) reported an in-line performance with revenue up 13.1 per cent YoY and its EBITDA margin standing at 4.5 per cent. Profit after tax was higher at Rs 931 million, owing to higher 'other income' and the benefit on income taxes under section 80JJAA.

SIS delivered healthy growth in 4QFY23 despite a weak macro environment. The management commentary remained strong. Cross-selling opportunities in India Security and FM business, increase in minimum wages, and longer-term tailwinds from sector consolidation would be expected to help SIS deliver a 15.4 per cent estimated revenue CAGR over FY23-25.

The management guided that, with a current market share of 5 per cent in security services, the company aims to grow its market share to 10 per cent over the next few years through robust organic growth and acquisitions.

The brokerage also reported that the management is confident of returning to 6 per cent EBITDA margins for India's Security and Facility management business as the gross margins remain intact. Overall, the reduced share of International business should support blended
margins. The company will slowly move back to pre-covid margins.

The brokerage suggests that "with liberalization and formalization of labor markets and laws, SIS will be among the biggest direct beneficiaries. SIS has managed to gain market share during the pandemic and the trend is expected to continue".

Motilal Oswal's research report recommends buying the stock as it sees a potential upside of 38 per cent. "We arrive at our target price of Rs 520 per share. We reiterate our BUY rating on the stock. Our target price implies a target P/E multiple of 15x for FY25E. We view this as reasonable, given its strong growth profile and unique resilience to macroeconomic shocks".

About SIS Limited
SIS Limited is a mid cap company, formerly known as Security and Intelligence Services (India). It is a private security firm in India, Australia, and New Zealand. It was set up in 1985 by Ravindra Kishore Sinha, an Indian billionaire businessman and journalist. The company offers security solutions including planning and deployment of security and armed guards, firemen, dog handlers, consulting, and investigation works.

Share price movement SIS Limited
The latest stock price of SIS Limited is Rs 383.85 per share, which is up by 2.03 per cent over the previous day's closing. The 52-week high is at Rs 502 per share while the 52-week low is at Rs 317.95 per share. The share price has declined sharply by 21.15 per cent in the last one year while over three years it has been down by nearly 3.99 per cent.

Disclaimer
The stocks have been picked from the brokerage report of Motilal Oswal. Greynium Information Technologies, the Author, and the respective Brokerage house are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to consult with certified experts before making any investment decision.