Shares of Firstsource Solutions (FSL) hit a new high of Rs 309.50, as they rallied 13 per cent on the BSE in Thursday’s intra-day trade amid heavy volumes.
In the past week, the stock of RP-Sanjiv Goenka Group Company has surged 25 per cent as the company reported a solid set of numbers for June quarter (Q1FY25). In the month of July, the stock rallied 30 per cent, while it zoomed 75 per cent from its June month low of Rs 176.70.
At 11:04 a.m., FSL was trading 10% higher at Rs 300.70, compared to 0.15 percent rise in the BSE Sensex. The average trading volume on the counter increased almost fivefold. A combined 33.14 million shares representing 4.75 per cent of total equity of FSL have changed hands on the NSE and BSE. FSL is a specialised global business process services partner that offers transformational solutions and services across the customer lifecycle in healthcare, banking and financial services, communications, media and technology, and other industries.
On Tuesday, July 30, FSL announced the launch of Firstsource relAI (pronounced re-ly), a suite of AI-driven platforms, solutions, and offerings to drive digital transformation. The suite of offerings aims to empower businesses of all sizes to seamlessly integrate digital technology and AI into their operations, driving efficiency, innovation, and competitive advantage.
Meanwhile, in Q1FY25, FSL produced its highest-ever quarterly revenues and showed broad-based growth across verticals, barring the BFS sector, where rising lending rates remain an overhang. FSL gained 10 new logos & won 3 significant transactions throughout the quarter and closed the quarter with a solid exit deal pipeline which gives optimism that the growth momentum experienced in Q1 will further continue well inside FY25 as well.
FSL revised its FY25 revenue growth guidance to 11.5-13.5 percent in constant currency (CC) terms (from 10-13 percent previously) and maintained its earnings before interest tax (EBIT) margin guidance of 11-12 percent for FY25 and 50-75 basis points thereafter. The management reiterated its goal of achieving a $1 billion exit run rate by the fourth quarter of FY26.
FSL generates 65 per cent revenues from the US and 35 per cent from the UK. The company is a domain driven BPM services company which has 150+ global clients, including 18 Fortune 500 companies and 3 FTSE 100 companies. It has 27,940 employees across the US, UK, India and Philippines.
According to analysts at ICICI Securities, FSL's medium and long-term growth will be driven by client acquisition, portfolio expansion, and margin enhancement initiatives. Margin expansion will be achieved through strategies such as onsite-offshore shift, sourcing and staffing optimization, technology adoption, and automation. EBIT margins of 11.6 and 12.1 percent are expected in FY25 and FY2, respectively.
FSL upped its FY25 revenue growth guidance to 11.5-13.5 per cent in CC (from 10-13 per cent), implying 0-1.1 per cent CQGR over Q2-Q4 which seems conservative, based on the vertical-wise outlook and pipeline strength, according to analysts at Emkay Global Financial Services.
FSL is likely to sustain the growth momentum, on broad-based growth, strong deal wins, and likely recovery in mortgage, with start of an interest rate-cut cycle expected in the US. “We raise our target multiple (TM) to 25x (from 20x), given strong execution. Granted that the 25x TM is rich for a BPM company with potential risks stemming from AI/GenAI, but FSL’s stronger near-term growth profile and superior execution warrant a higher multiple,” the brokerage firm. However, currently, the stock is trading above analyst’s target price of Rs 300 per share.
