TeamLease Services plunges 18%, hits two-year low on margin concerns

Shares of TeamLease Services plunged 18 per cent to hit a two-year low of Rs 2,331 on the BSE in Thursday’s intra-day trade due to margin concerns.

The stock was trading at its lowest level since November 2020. In the past one year, the market price of the company has halved as compared to a 0.24 per cent rise in the S&P BSE Sensex. The stock had hit a record high of Rs 5,544 in October 2021.

At 01:38 pm; TeamLease was trading 16 per cent lower at Rs 2,406 as compared to a 0.85 per cent decline in the S&P BSE Sensex.

TeamLease Services is a leading HR services company offering a range of solutions to 3500+ employers for their hiring, productivity, and scale challenges. A Fortune India 500 company listed on the NSE & BSE, TeamLease has hired over 19 lakh people over the last 21 years.

The management said that the headwinds in the IT industry have started impacting the specialized staffing growth and may continue for a while. The company’s HRtech business is gearing up on new sales, product enhancement and digital solutions. Revenue growth and tighter cost control will be the focus areas for the next few quarters, it said.

Meanwhile, in the July-September quarter (Q2FY23), TeamLease reported a profit after tax of Rs 32 crore vs a loss of Rs 49 crore in the year ago quarter. Its PAT was Rs 27 crore in the previous quarter. Earnings before interest, taxes, depreciation, and amortization (EBITDA) improved 30 bps sequentially, while down 60 bps YoY at 1.6 per cent. Operating revenue grew 28 per cent YoY and 4 per cent sequentially to Rs 1,955 crore.

According to ICICI Securities, TeamLease’s margin performance came in better than expected. The company guided for similar margins in FY23 as that of FY22 i.e 2.2 per cent, considering current run rate in H1.

The brokerage believes that achieving that number would be an uphill task (Rs 170 crore EBITDA in H2 vs Rs 57 crore in H1) and the company is likely to miss that number. Also, the headcount addition has been moderating indicating slower growth in H2, it said in a result note.

According to analysts at Kotak Securities, TeamLease has not been able to increase per-associate-per-month (PAPM) despite a rise in proportion of self-sourced employees. It needs to make an entry into the manufacturing sector to benefit from employment growth in that sector, but has so far found the same challenging. The specialized staffing segment may see tepid volume growth due to slower IT sector hiring, the brokerage said in a result update.

“We revise down our FY23-25 EPS estimates by 2-9 per cent on lower margin forecasts. Coupled with higher WACC, this drives a new SoTP-based FV of Rs 2,900 (Rs 3,215 earlier),” it said.