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- 03 Nov 2022
- ICICIdirect Research
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FIRSTSOURCE FURTHER DOWNGRADES REVENUE GUIDANCE TO -2 TO 0% IN CC TERMS FOR FY23
FSL - 363 Change: 4.35 (1.21 %)News:
FSL posted weak Q2 results on both revenues & margins. The company reported revenue of US$187 mn, down 2.1% QoQ (up 0.2% in CC terms) as mortgage business. In rupee terms the company reported a revenue of Rs 1,488.2 crore, up 1.1% QoQ. Vertical wise healthcare reported a growth of 5.2% QoQ while CMT declined by 2.1% QoQ. BFS (43.4% of mix) continue to decline reporting a degrowth of 8.2% QoQ due to challenges faced in mortgage & collection side of business. Geography wise US (67.2% of mix) declined by 3.8% QoQ while UK grew by 1.8% QoQ. EBIT margins improved marginally ~48 bps to 8.4% as the company continues its cost rationalization activities. PAT of the company increased by 52% QoQ to Rs 129.4 crore due to higher other income due to onetime adjustments of fair value liability for contingent considerations which are expected to be settled in H2FY23. The company has further revised downward revenue guidance and now it is guiding -2 to 0% growth in CC terms while it expects operating margins to be in the range of 9-9.5% band for FY23 from the earlier 10-10.5%
View:
The collections business seeing slower recovery compared to company’s expectations as delinquencies rise to 1.81 from 1.66 in the last quarter and it expects this business to be muted for few more quarters from now before any meaningful pick up happens. The company has earlier indicated that the mortgage business which is under pressure due to high interest rate would bottom out by Q2 but now it has indicated that it will take few quarters for the environment to settle implying further deterioration in the mortgage business. In Healthcare segment, the company has made inroads to top 8 out of 10 clients in the last 2 years but the clients are going through rigorous renewal process and hence decision making is expected to delay
Impact:
Negative