Updater Services - Diversified Play On High-Growth Business Services: Motilal Oswal Initiates Coverage

Motilal Oswal Report

Updater Services Ltd. is one of the leading business service providers in India, with a presence in integrated facilities management and other business support services segments such as sales enablement, BPS, recruitment, and sales audits.

We see the company as a unique opportunity to benefit from the long-term trend of outsourcing non-core business operations for greater efficiency and service quality.

With continued momentum in the integrated facilities management space (growing in the high teens), and an inorganic growth engine in the high-margin BSS vertical, we expect Updater Services to deliver sustainable and profitable growth.

We expect its earnings compound annual growth rate (~33%) to outpace revenue CAGR (~19%) over FY24-FY26.

The company sees inorganic growth, along with continued exceptional performance, as a core feature of its long-term growth strategy. This growth will be supported by its healthy cash balance of ~Rs 2,534 million (10% of market cap) and a strong cash conversion rate (115% operating cash flow/Ebitda in FY23).

Considering the steady revenue and earnings growth potential, Updater Services’ valuation looks inexpensive at 13 times FY26E adjusted earnings.

Initiate coverage with a 'Buy' rating and a target price of Rs 465 (premised on 18 times FY26E price/earnings on adjusted earnings per share).

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