Buy EFC Ltd For Target Rs. 465 By Choice Broking Ltd
Expected to Fire on All Cylinders
We maintain our BUY rating on EFCIL, leaving our TP unchanged at INR 465. We are constructive on EFCIL due to :
1) ~20k seat addition in FY26/27/28E each taking the total stock of seats leased under management to 118k by FY28E (~doubling from FY25 end), 2) Backward integration into Design & Build segment as well as Furniture Manufacturing segments which keeps margins healthy (~30% EBITDA margins), 3) Design and Build segment profitable CAGR of 50% over FY25-28E and 4) Furniture Manufacturing segment CAGR of 93% over FY25-28E and an EBITDA margin of 30%.
We forecast EFCIL’s consolidated EBITDA to grow at a CAGR of 46% over FY25-28E, supported by our assumptions as discussed above. Any gains from REIT IPO launch would be an additional bonus (upside optionality) that we don’t factor into our numbers.
Valuation: We arrive at a 1 year forward (FY27E-28E blended) TP of INR 465/share for EFC. We now value EFC on our EV/EBITDA framework, where we assign an EV/EBITDA multiple of 10x/10x for FY 27E/ 28E (consolidated basis), which we believe is reasonable given the growth rate, margin profile. On our target price of INR 465, FY27E implied P/BV multiple translates to 2.6x.
Quarterly Performance: A tad softer than our optimistic expectations (INR Mn)
* Revenue for Q1FY26 came in at INR 2,196 Mn, up 115% YoY and 4% QoQ vs CIE estimates at 2,112 Mn.
* EBITDA (excluding OI) for Q1FY26 was reported at INR 1,022 Mn, up 120% YoY and down 6% QoQ vs CIE estimates at 1,058 Mn. Q1FY26 EBITDA Margin came in at 46.6% vs 45.5% in Q1FY25 and 51.8% in Q4FY25 vs CIE estimates at 50.1%.
* As of Q1FY26 end, Total seats stood at 63,389 vs 60,012 in Q4FY25. Seat addition was on the softer side, but we expect the same to pick up in the rest of FY26E.
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