Incorporated in 2000, as a part of the Hinduja Group, Hinduja Global Solutions Ltd. (HGS) is a leading Business Process Management (BPM) and IT solutions provider to Healthcare/Insurance, Financial Services, Telecommunications and Consumer Products sector. HGS is accredited as one of the foremost players in Contact Center Outsourcing space by the analyst and advisor community. By relating analytics and interaction transformation design to provide innovation and thought leadership, HGS upturns revenue, increases operating efficiency and aids to hold valued customers. Its expertise spans across the telecommunications and media, healthcare, insurance, banking, consumer electronics and technology, retail, consumer packaged goods industries, as well as the public sector. Its client base contains particularly the world’s most recognized brands across North America, Europe, Asia and Africa.
Valuation and view
Over the years, HGS has been capitalising on its strong clientele base, technical expertise and successful acquisitions in order to strengthen its balance sheet and increase its revenues. Given its pure play BPO services and its market standing, we believe that the company is in a favourable position to further leverage on its expanding capacities in the Healthcare and the telecom segments. We expect HGS’ net profit to grow at a CAGR of ~11% during FY14-FY16E and believe that it will continue to deliver strong return ratios as well.
At the current market price (CMP) of Rs555.5, the stock trades at a P/E of 37.5x FY16E and 33x FY17E. We recommend ‘BUY’ with a target price of Rs689.0, which implies a potential upside of ~24% to the CMP from a long term perspective.
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