Buy EFC Ltd For Target Rs. 375 By Choice Broking Ltd
Promising Prospects for all 3 Verticals
We maintain our BUY rating on EFCIL, with a revised TP of INR 375/sh. We continue to be constructive on EFCIL owing to :
1) ~22k/20K/15k seat addition in FY26E/27E/28E, cumulatively taking the stock of seats leased under management to 117.5k by FY28E (~doubling from FY25 end).
2) Backward integration into Design & Build as well as Furniture Manufacturing segments, which keeps margin healthy (~30% EBITDA margin).
3) Revenue from Design and Build (D&B) segment to grow at a 50% CAGR over FY25–28E.
4) Revenue from the Furniture Manufacturing segment to grow at a 93% CAGR over FY25 – 28E and EBITDA Margin in the range of 25 – 30%
We forecast EFCIL’s consolidated EBITDA to grow at a CAGR of 46% over FY25 – 28E, supported by our assumptions as discussed above.
Valuation: We arrive at a 1 – year forward (FY27E – 28E blended) TP of INR 375/share. We now value EFCIL on our EV/EBITDA framework, where we assign an EV/EBITDA multiple of 10x/10x for FY27E/28E (consolidated basis), which we believe is reasonable given its growth potential and margin profile. On our target price of INR 375, FY27E implied P/BV multiple is 3.4x.
Risks: Possible general slowdown in the domestic economy, wearing out/dwindling startup funding, chances of abating of offshoring/GCC trend and probable predatory pricing by larger competitors.
Q2FY26: Healthy revenue growth and seat addition but margin disappoints
? Revenue for Q2FY26 came in at INR 2,546Mn, up 16% QoQ and 53% YoY vs CIE estimate at 2,533Mn.
? EBITDA (excluding OI) for Q2FY26 was reported at INR 1,108Mn, up 8% QoQ and 40% YoY vs CIE estimate at 1,345Mn. Q2FY26 EBITDA margin came in at 43.5% vs 46.6% in Q1FY26 and 47.7% in Q2FY25 vs CIE estimate at 46.6%.
? EFCIL added 5,032 seats in Q2FY26, taking the total seat count to 68,241 vs 63,389 in Q1FY26. Total billed seats increased to 55,924 vs 53,250 seats in Q1FY26.
