Buy SIS, target price Rs 600: Motilal Oswal

Motilal Oswal has buy call on SIS with a target price of Rs 600. The current market price of SIS is Rs 489.
Time period given by analyst is one year when SIS price can reach defined target.

SIS Ltd., incorporated in the year 1985, is a Mid Cap company (having a market cap of Rs 7062.73 Crore) operating in Services sector.

Financials
For the quarter ended 30-06-2021, the company reported a Consolidated Total Income of Rs 2390.84 Crore, down -14.46 % from last quarter Total Income of Rs 2795.01 Crore and up 9.18 % from last year same quarter Total Income of Rs 2189.81 Crore. Company reported net profit after tax of Rs 60.13 Crore in latest quarter.

Investment Rationale
Over the medium term, as both the Central and State governments look to liberalize and formalize the labor markets, SIS should be among the biggest direct beneficiaries. The brokerage values SIS at INR600/share using SoTP valuation: 1) DCF for the India Security business (INR335/share), 2) EV/EBITDA multiple of 8x (INR156/share) for the International Security business (in line with global peers), and 3) DCF for the Facilities Management business (INR116/share). The brokerage arrives at TP of INR600 per share. Its TP implies a target P/E multiple of ~29x/21x for FY22E/FY23E. It views this as reasonable, given its strong growth profile and unique resilience to macroeconomic shocks

Promoter/FII Holdings
Promoters held 72.9 per cent stake in the company as of June 30, 2021, while FIIs held 11.5 per cent, DIIs 5.5 per cent and public and others 10.1 per cent.