Goldman Sachs – Why Shares Of Quess Corp, TeamLease Rallied Over 20% In Last Three Sessions
Shares of Quess Corp Ltd. and TeamLease Ltd. have rallied more than 20% in the last three sessions as Goldman Sachs initiated coverage on the staffing firms with a ‘buy’.
Goldman Sachs pegged the price target for TeamLease at Rs 4,940 and Quess Corp at Rs 739 apiece, implying a potential upside of more than 80% and 22%, respectively, from the current level.
The global financial services provider expects India’s flexi-staffing industry to witness double-digit revenue growth, owing to cyclical and secular tailwinds, it said in a note. Goldman Sachs expects the market size for India’s staffing industry to grow sixfold over the next decade to $61.5 billion by 2030 from $10.4 billion now.
“Over the longer term, we see secular tailwinds in the form of increasing workforce formalisation, helped by the enactment of new labour reforms and the focus on Make in India,” Goldman Sachs said in the note. “Over FY22/23, we see the industry growing at 25%/22% as India’s GDP is expected to revive to 10.6% in CY21 while flexi staffers act as a spring board for companies as labour demand recovers.”
The research firm expects TeamLease’s revenue to grow at an annualised rate of 31% over FY21-23 on the back of increasing economic formalisation and a cyclical uplift in demand with improving macros, along with operating leverage, given its thin EBIT margin.
“We like TeamLease on account of its strength around tech platforms and deep client relationships, providing the necessary moat in an industry with low-entry barriers and some large global players,” Goldman Sachs said.
For Quess Corp, Goldman Sachs expects a revenue and EBIT CAGR of 22% and 27%, respectively, over FY21-23 on strong headcount growth in Workforce management and attractive valuations.
“We like Quess Corp given its improving return profile, target of 20% OCF (operating cash flow) growth and aggressive plans to grow its Workforce management business, along with the cross-selling of various other services,” the note said.
Shares of TeamLease gained as much as 7.2% to a record high of Rs 3,475 apiece on Monday. The stock has gained 24% over the last three trading sessions. Of the 17 analysts tracking the company, 13 suggest a ‘buy’, one recommends a ‘hold’ and three have a ‘sell’ call. The stock is trading 6% higher than its Bloomberg consensus 12-month price target of Rs 3,189.4.
Shares of Quess Corp gained as much as 10.5% as of 11 a.m. on Monday to Rs 761.7 — the highest since April 2019. The stock has gained 21% over the last three trading sessions. Of the 11 analysts tracking the company, 10 recommend a ‘buy’ and one suggests a ‘sell’. The stock is trading 9.1% higher than its Bloomberg consensus 12-month price target of Rs 3,189.4.
Quess Corp and TeamLease have added Rs 1,953 crore and Rs 1,118 crore to their respective market value over the last three trading sessions.