scorecardresearchKeynote Capital initiates coverage on SIS, sees over 90% upside; here's

Keynote Capital initiates coverage on SIS, sees over 90% upside; here's why

Updated: 26 Sep 2023, 03:55 PM IST

Brokerage house Keynote Capital initiates coverage on SIS Ltd (SIS) with a ‘buy’ rating and a target price of 837. The brokerage sees over 90% upside in the stock. It has been volatile in 2023, with positive returns in 5 of 9 months so far. However, it has shed 10% in September.

Brokerage house Keynote Capital initiates coverage on SIS Ltd (SIS) with a 'buy' rating and a target price of  <span class='webrupee'>₹</span>837.

Brokerage house Keynote Capital initiates coverage on SIS Ltd (SIS) with a 'buy' rating and a target price of 837.

After an almost 10 percent fall in September so far, brokerage house Keynote Capital sees an over 90 percent jump in SIS Ltd (SIS), formerly known as Security and Intelligence Services (India).

The brokerage has initiated coverage on the stock with a ‘buy’ call and a target price of 837 as against the current market price of 439.90.

Founded in 1985, SIS is an Indian multinational company, that currently holds market leadership in India-Security Solutions (5 percent), India-Facility Management (4.5 percent), India-Cash Logistics (17 percent), and International Security (Australia, 23 percent) as of FY23. Impressively, the company has expanded its customer base by 27 percent from 6,000 in FY19 to 21,000 in FY23 across the 3 segments. SIS has demonstrated steady revenue growth at 12 percent between FY19 and FY23, with management expectations of a 15 percent growth trajectory for the next 4-5 years.

"We believe that the leadership position of the Company, supported with subtle and evident areas of strength, makes a major potential benefactor of the rising prospects in the industry for the following 3 years. Consequently, we initiate coverage on SIS Ltd. with a high-conviction BUY rating at a 5-year median PE of 22x on FY26E EPS, giving a target price of 837," said the brokerage.

Stock Price Trend

The stock has given muted returns in the last 1 year as well as in 2023 YTD, up just 5 percent and 2 percent, respectively. In the current year so far, the stock has been pretty volatile, giving positive returns in 5 of the 9 months and negative in the remaining 4 months.

The stock has shed almost 10 percent in September so far, snapping gains after 5 straight positive months. Between April and August, the stock had rallied 48 percent. However, it was in the red in the first 3 months of this year, down over 18 percent between January and March.

Currently trading at 439.90, the stock has already declined 9 percent from its 52-week high of 482.60, hit earlier this month on September 6, 2023. Meanwhile, it has advanced over 38 percent from its 52-week low of 317.95, hit on March 31, 2023.

SIS stock

Investment Rationale

Technology infrastructure: As per the brokerage, SIS, though people-centric, has a strong tech backbone. Tools like Automated Recruitment Kiosk (ARK), Intelligent Operations (iOPS), mTrainer, and mySIS capture and share data, empowering all stakeholders. The company’s software assets have grown by 27 percent since FY18, with a 38 percent CAGR in intangible assets. It has reduced general and administrative expenses to 3 percent from a long-term average of 5 percent, said the brokerage.

Unlocking value in the cash logistics segment: The company is undergoing a transformation phase on the back of measures like reducing the contribution from ATM replenishment business from 65 percent in FY18 to 21 percent in FY23, said Keynote. Resultantly, cost control reduced the cost-to-sales ratio from 99 percent to 86 percent, increasing EBITDA margins from 1 percent to 16 percent from FY19 to FY22, added the brokerage. A free cash flow of 20 crore in FY22 indicates further potential of reducing debt gradually and increasing net profit margins, it added.


SIS is a formidable player in an extremely competitive industry, which has made its way to leadership through forms of inorganic growth, vesting power at different levels of the hierarchy, uncommonly deploying funds in technology to become a secure-tech company and fostering its employees with training so that they themselves become more powerful to drive their locus of control, whereby taking the entire company in the best direction, noted the brokerage.

It further pointed out that SIS at its best footing, has been able to grow its entire business at 12 percent CAGR, with Security India at 14 percent, Facility Management at 19 percent, and Security International at 9 percent between FY19 and 23.

With brightening industry and economic prospects, the brokerage anticipates the overall business growth to sustain at 12 percent for the next 3 years, with Security India growing at 15 percent, Facility Management at 20 percent, and Security International at 6 percent.

Further, with EBITDA margins increasing from 4.3 percent to 5 percent, it will contribute additionally to the bottom line, said Keynote. Another key contributor to net profit is anticipated to be the cash logistics business, which it believes can grow at 20 percent CAGR for the next 3 years, outgrowing its previous 4-year CAGR (FY19-23) at 17 percent.

Additionally, the brokerage believes the segment’s PAT margin shall increase from 4 percent in FY23 to 10 percent in FY26 on the back of cost rationalisation and resultantly increase its contribution to consolidated net profit from 3 percent to 8 percent in the same course, resulting in 17 percent CAGR for net profit.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie. We advise investors to check with certified experts before taking any investment decisions.


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First Published: 26 Sep 2023, 03:55 PM IST