Stock Pick From Engineering Sector

This column gives you scrip chosen by the research team during the fortnight that is fundamentally strong and expected to give good capital appreciation over a time period of 1 year.



Here Is Why

Strategic partnership with NTTF

Quess Corp has presence across North America, Middle East and South East Asia. The company has a pan-India presence with 47 offices across 26 cities in India. Its 66 centres across India have been providing skill development services.

Quess Corp successfully raised capital of Rs 400 crore through initial public offer which came in July, 2016. The company will utilise funds for repayment of its debt of Rs 50 crore, capex Rs 71.7 crore, working capital Rs 157.9 crore, acquisitions Rs 80 crore and rest Rs 40 crore for corporate functions.

Quess Corp has entered into a partnership with Nettur Technical Training Foundation (NTTF), a technical training services center in India, to extend government of India’s skills initiative, the ‘National Employability Enhancement Mission’ (NEEM). The platform offered by 66 training centres of Quess Corp and NTTF’s 20 centres across India, will create scale to train candidates on a pan-India basis for clients.

On quarterly front, Quess Corp’s revenue increased by 35.7 per cent to Rs 991 crore in Q1FY17 as compared to same period in previous financial year. The company’s EBITDA too rose by 59.59 per cent to Rs 52.75 crore in Q1FY17 on yearly basis. Its EBITDA margin expanded by 79 basis points 5.32 in Q1FY17 as compared to same period in previous fiscal year. Quess Corp’s net profit also boosted by 37.05 per cent to Rs 26.69 crore in Q1FY17 on a yearly basis.

Quess Corp’s top line has increased by 40.07 per cent CGAR in FY16, during past five financial years. The company’s EBITDA too rose by 43.58 per cent CAGR during FY12-FY16. Its bottom line also boosted by 71.28 per cent CAGR in FY16 during past five fiscal years.

On yearly front, Quess Corp’s revenue increased by 33.81 per cent to Rs 3435 crore in FY16 as compared to previous financial year. The company’s EBITDA too rose by 25.26 per cent to Rs 165 crore in FY16 on yearly basis. Its net profit also increased by 31.7 per cent to Rs 88.52 crore in FY16 as compared to previous fiscal year. Quess Corp enjoys healthy debt to equity ratio at 1.08x with debt of Rs 374.4 crore as of FY16. The company’s ROE and ROCE stood at 30.07 per cent and 25.76 per cent in FY16 respectively.

On segmental revenue front, Quess Corp earned 56.76 per cent from people and services, 26.82 per cent from global technology solutions, 10.83 per cent from integrated facility management and 5.59 per cent from industrial asset management during FY16. On geographical front, the company earned 85.71 per cent from domestic and remaining 14.29 per cent from export in FY16.

On valuation front, Quess Corp’s PE multiple is trading at 86.25x times against TeamLease Services’ PE multiple of 73.3x times. Meanwhile, industry PE is trading at PE multiple of 39.15x times. Hence we recommend readers to BUY the stock.