Security & Intelligence Services - Q2FY21 Company Update - ICICI Securities

Concerns around (1) structural impact on the business case of security/FM due to WFH and (2) levered balance sheet led the stock to languish ~40% below pre-Covid levels. SIS, being one of the very few players with integrated offerings, should be a key beneficiary led by improving volumes post Covid. Invoicing trends in September 2020 suggest overall business is better than in March 2020. While pockets like Facility Management (FM) are still ~25-30% lower, pent-up demand being witnessed in (revenge) travel, shopping and leisure should drive normalisation during the current festive season. Improvement in liquidity position and restatement of debt appetite (from net debt/EBITDA of 1.5x to 1.0x) are key balance sheet positives.

Valuation & Outlook

Even as the business run rate and balance sheet/liquidity position are now better vs. pre-Covid and some investor concerns (e.g. debt appetite) are addressed, the stock is still languishing ~40% below pre-Covid level, trading at 16x FY23E EPS. We expect the fundamental improvement to be a key and quick value driver, going ahead. We upgrade the stock to BUY (from HOLD) with a revised target price of Rs. 450 (implying 18x FY23E EPS).

For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_SIS_CoUpdate_Oct20.pdf

Shares of Security and Intelligence Services (India) Ltd was last trading in BSE at Rs.382 as compared to the previous close of Rs. 371.75. The total number of shares traded during the day was 18364 in over 1853 trades.

The stock hit an intraday high of Rs. 389.65 and intraday low of 368.95. The net turnover during the day was Rs. 6975534.

Source : Equity Bulls

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