SIS Ltd Stock Research Report

Better Recovery; Improving Outlook to Support Growth

Est. Vs. Actual for Q2FY25: Revenue – BEAT ; EBITDA Margin – BEAT; PAT – BEAT

Changes in Estimates post Q2FY25

FY25E/FY26E: Revenue 0.5%/0.5%; EBITDA 1%/1%; PAT 0.5%/ 1%

Recommendation Rationale

1. The outlook for verticals such as Security Solutions and Facility Management remains positive.
2. International business has experienced a decline but is expected to regain momentum.
3. The management is confident that demand will pick up in the medium term, supported by orders won in recent quarters. It also anticipates further improvement in margins moving forward.

Sector Outlook: Cautiously positive

Company Outlook & Guidance: The management has given an improved outlook for FY25, backed by the robust pick-up in Security Business and Facility Management in India. The company’s margins are likely to expand in the near term.

Current Valuation: 16x FY26E P/E; Earlier Valuation: 16x FY26E

Current TP: 540/share (Earlier TP: Rs 540/share)

Recommendation: Given the company’s strong recovery potential backed by strong deal wins and improved client engagement, we maintain our BUY recommendation on the stock.

SIS Ltd Stock Research Report

Financial Performance:

In Q2FY25, SIS reported revenue of Rs 3,269 Cr, reflecting growth of 4.4% QoQ and 6.4% YoY. The company’s consolidated EBITDA for the quarter increased by 5.4% QoQ to Rs 144.5 Cr, attributed to a recovery in international business and strong demand for Indian security solutions. Net income for the quarter was Rs 68.8 Cr, indicating a robust recovery. Security Services in India declined by 6.2% QoQ for the quarter. However, the management remains optimistic about increasing demand for security guards and mandatory checkups in the future.

Outlook

From a long-term perspective, we believe SIS is addressing client-specific engagement issues in verticals such as the International business. However, rising concerns over the prospects of large economies, coupled with prevailing business and demographic constraints, introduce uncertainties regarding the company’s short-term growth rates.

Valuation & Recommendation

We recommend a BUY rating on the stock and assign a 16x P/E multiple to its FY26E earnings of Rs 34.7/share to arrive at a TP of Rs 540/share, implying an upside of 40% from the CMP.

Key Financials (Consolidated)