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Result Synopsis

SIS Ltd (SECIS) reported inline financial performance for the quarter. Both, the revenue growth and EBITDA margin were broadly inline with estimates. It reported sequential revenue growth of 3.1% QoQ, led by India security business (up 1.0% QoQ) and Facilities management business( up 1.3% QoQ) and International Security business(up 5.8% QoQ). There was sequential improvement in EBITDA margin(up 14bps QoQ) due to continued focus on efficiency measures across segments. Net debt decreased to Rs 8.6bn( vs Rs 9.9bn as Dec'22), as it paid down part of its debt in response to increasing interest rates.

The growth of SIS will be fueled by rising penetration of security and facility management business in India and the shift of market share from unorganized to organized players. The business performance remains resilient even during economic downcycles. Also, the vendor consolidation would benefit large players such as SIS Ltd. The EBITDA margin profile should improve going ahead led by normalization of business environment. We estimate revenue CAGR of 14.9% over FY23?25E with average EBITDA margin of 5.3%. We maintain our BUY rating on the stock with revised target price of Rs 560/share based on DCF methodology. The stock trades at PER of 13.2x/10.3x on FY24E/FY25E EPS.

Result Highlights

? Reported revenue of Rs 29.9bn (up 13.1% YoY, up 3.1% QoQ), led by India security business (up 1.0% QoQ) and Facilities Management business (up 1.3% QoQ). International Security business increased by 5.8% QoQ.
? EBITDA margin improved by 14 bps QoQ to 4.5%. The improvement in EBITDA margin was due to efficiency measures across segments as Facility Management EBITDA margin increased by 40 bps QoQ and India Security reported 10 bps QoQ improvement in EBITDA margin.
? PAT for the quarter Q4FY23 was Rs. 931 mn which was down 10.0% q-o-q and down 4.4% on y-o-y basis. The decrease in PAT was due to lower tax credit in the quarter.
? Net debt decreased to Rs 8.6bn (vs Rs 9.9bn as Q3FY23), with decrease in debt led by strong cash flow generation as it paid down Rs 826mn of debt in Australia business.
? Net debt/ EBITDA was 1.75x as of March 2023 vs 2.1x in Dec 2022.

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