Sqs India Bfsi demonstrates fast growth in fundamentals
30-04-2014 • About Sqs India Bfsi (
$SQSBFSI) • By InTwits
Sqs India Bfsi is an attractive growth stock in IT Consulting & Software industry. Its revenue performance, profitability and healthy financial model stands it out vs. other public companies on the market.
Growth story
Sqs India Bfsi showed fast growth in the last financial year. The company's revenue surged on 20.4% in FY2014. EBITDA also increased considerably: 31.6% for the same period.
In the last 3 years the company showed fast revenue growth of 32.9% from FY2011 to FY2014 annually. EBITDA surged on 141% from FY2011 to FY2014 annually.
Sqs India Bfsi ($SQSBFSI) financials for the last 5 years
| mln. INR | FY2010 | FY2011 | FY2012 | FY2013 | FY2014 |
|---|
| Revenue | 2,474 | 829 | 1,214 | 1,614 | 1,944 |
|---|
| Revenue growth, % | | -66.5% | 46.4% | 32.9% | 20.4% |
|---|
| SG&A, % | | | | | |
|---|
| EBITDA | 96 | 28 | 129 | 303 | 399 |
|---|
| EBITDA growth, % | | -70.5% | 354.8% | 135.2% | 31.6% |
|---|
| EBITDA margin, % | 3.88% | 3.41% | 10.6% | 18.8% | 20.5% |
|---|
| Net Income | 82 | 19 | 114 | 194 | 300 |
|---|
| Net Income margin, % | 3.33% | 2.26% | 9.37% | 12.0% | 15.4% |
|---|
| |
| CAPEX | 22 | 98 | 35 | 251 | 25 |
|---|
| CAPEX/Revenue, % | 0.880% | 11.8% | 2.86% | 15.5% | 1.30% |
|---|
| Debt | 0 | 0 | 0 | 143 | 119 |
|---|
| Cash | 314 | 239 | 235 | 293 | 395 |
|---|
| Net Debt/EBITDA | -3.3x | -8.4x | -1.8x | -0.5x | -0.7x |
|---|
| |
| ROIC, % | 14.0% | 0.1% | 12.1% | 27.0% | 29.4% |
|---|
| ROE, % | 14.2% | 2.7% | 15.6% | 23.7% | 30.6% |
|---|
Profitability and return on investment
EBITDA growth was partly attributed to margin expansion. Sqs India Bfsi's EBITDA margin increased on 1.70 pp from 18.8% to 20.5% in FY2014. In the longer period the company's EBITDA margin surged on 17.1 pp from 3.40% in FY2011 to 20.5% in FY2014.
We call Sqs India Bfsi an attractive growth stock as together with the growth it delivers high ROIC at 29.4%. Three years ago it was considerably lower at 0.0619%. Average ROIC for the last three years was 22.8%.
Sqs India Bfsi showed fast Net Income margin growth of 3.40 pp from 12% to 15.4% in FY2014. If we look for the longer period the company's Net Income margin surged on 13.1 pp from 2.30% in FY2011 to 15.4% in FY2014.
Sqs India Bfsi operates at ROE of 30.6%. For the last three years the average ROE was 23.3%.
Capital expenditures (CAPEX)
Sqs India Bfsi's CAPEX/Revenue was 1.30% in FY2014. CAPEX/Revenue dropped on 10.5 pp from 11.8% in FY2011 to 1.30% in FY2014. Average CAPEX/Revenue for the last three years was 6.56%.
Leverage (Debt)
Sqs India Bfsi has negative net debt at -0.7x Net Debt/EBITDA - at the same time with high growth. If we look for the longer period leverage surged on 7.74x from -8.43x in FY2011 to -0.69x in FY2014.
Valuation vs. comparable companies
The market closed today at 9.4x EV/EBITDA for Sqs India Bfsi which is 41.5% lower than 16.0x IT Consulting & Software peer group avearge calculated on the basis of 102 companies. The market closed today at 13.3x P/E for Sqs India Bfsi which is 49.7% higher than 8.9x IT Consulting & Software peer group avearge calculated on the basis of 5 companies.
Peers in IT Consulting & Software
Below we provide Sqs India Bfsi benchmarking against other companies in IT Consulting & Software industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.
Top companies by Revenue growth, %
| FY2010 | FY2011 | FY2012 | FY2013 | FY2014 |
|---|
| Top 5 |
|---|
| Tata Consultancy Services ($TCS) | | 24.3% | 31.0% | 28.8% | 29.9% |
| Mindtree ($MINDTREE) | | -65.0% | 26.6% | 23.2% | 28.8% |
| Infosys ($INFY) | | 20.9% | 22.7% | 19.6% | 24.2% |
| Wipro ($WIPRO) | | -56.9% | 19.8% | 0.6% | 16.0% |
| Cmc ($CMC) | | -65.2% | 35.5% | 31.1% | 15.8% |
| |
|---|
| Median (5 companies) | | -56.9% | 26.6% | 23.2% | 24.2% |
|---|
| Sqs India Bfsi ($SQSBFSI) | | -66.5% | 46.4% | 32.9% | 20.4% |
Top companies by Gross margin, %
| FY2010 | FY2011 | FY2012 | FY2013 | FY2014 |
|---|
| Top |
|---|
| Tata Consultancy Services ($TCS) | | | | | 47.4% |
| Infosys ($INFY) | 42.7% | 45.3% | 41.3% | 98.1% | 35.9% |
| Wipro ($WIPRO) | 31.8% | 31.5% | 29.2% | 30.4% | 32.0% |
| |
|---|
| Median (3 companies) | 37.3% | 32.8% | 31.5% | 36.2% | 35.9% |
|---|
Top companies by EBITDA margin, %
| FY2010 | FY2011 | FY2012 | FY2013 | FY2014 |
|---|
| Top 5 |
|---|
| Tata Consultancy Services ($TCS) | 29.0% | 29.9% | 29.5% | 28.6% | 30.7% |
| Infosys ($INFY) | 34.4% | 32.5% | 31.6% | 27.9% | 26.3% |
| Wipro ($WIPRO) | 8.3% | 21.1% | 19.1% | 20.9% | 22.4% |
| Mindtree ($MINDTREE) | 5.8% | 11.8% | 15.1% | 19.8% | 20.6% |
| Cmc ($CMC) | 5.6% | 19.4% | 15.3% | 16.5% | 18.0% |
| |
|---|
| Median (5 companies) | 8.3% | 21.1% | 19.1% | 20.9% | 22.4% |
|---|
| Sqs India Bfsi ($SQSBFSI) | 3.9% | 3.4% | 10.6% | 18.8% | 20.5% |
Top companies by CAPEX/Revenue, %
| FY2010 | FY2011 | FY2012 | FY2013 | FY2014 |
|---|
| Top 5 |
|---|
| Infosys ($INFY) | 3.7% | 4.7% | 4.9% | 5.2% | 5.5% |
| Mindtree ($MINDTREE) | 1.1% | 5.6% | 2.5% | 4.5% | 5.0% |
| Cmc ($CMC) | 0.9% | 9.2% | 8.1% | 4.4% | 4.0% |
| Tata Consultancy Services ($TCS) | 3.5% | 4.9% | 4.1% | 4.2% | 3.8% |
| Wipro ($WIPRO) | 1.5% | 3.9% | 3.5% | 2.8% | 2.1% |
| |
|---|
| Median (5 companies) | 1.5% | 4.9% | 4.1% | 4.4% | 4.0% |
|---|
| Sqs India Bfsi ($SQSBFSI) | 0.9% | 11.8% | 2.9% | 15.5% | 1.3% |
Top companies by ROIC, %
| FY2010 | FY2011 | FY2012 | FY2013 | FY2014 |
|---|
| Top 5 |
|---|
| Tata Consultancy Services ($TCS) | 44.7% | 47.1% | 48.6% | 48.4% | 50.2% |
| Mindtree ($MINDTREE) | 26.4% | 14.9% | 24.9% | 34.6% | 36.2% |
| Cmc ($CMC) | 32.0% | 31.5% | 26.2% | 33.2% | 35.3% |
| Infosys ($INFY) | 32.2% | 32.1% | 32.4% | 28.3% | 27.2% |
| Wipro ($WIPRO) | 23.7% | 21.3% | 19.1% | 19.6% | 23.2% |
| |
|---|
| Median (5 companies) | 32.0% | 31.5% | 26.2% | 33.2% | 35.3% |
|---|
| Sqs India Bfsi ($SQSBFSI) | 14.0% | 0.1% | 12.1% | 27.0% | 29.4% |
Top companies by Net Debt / EBITDA
| FY2010 | FY2011 | FY2012 | FY2013 | FY2014 |
|---|
| Top 5 |
|---|
| Mindtree ($MINDTREE) | -0.1x | -0.1x | -0.0x | -0.2x | -0.2x |
| Cmc ($CMC) | -0.1x | -0.2x | -0.2x | -0.4x | -0.3x |
| Tata Consultancy Services ($TCS) | -0.5x | -0.4x | -0.4x | -0.4x | -0.6x |
| Wipro ($WIPRO) | -0.0x | -0.1x | -0.3x | -0.3x | -0.6x |
| Infosys ($INFY) | -1.5x | -1.9x | -1.9x | -1.9x | -2.0x |
| |
|---|
| Median (5 companies) | -0.1x | -0.2x | -0.3x | -0.4x | -0.6x |
|---|
| Sqs India Bfsi ($SQSBFSI) | -3.3x | -8.4x | -1.8x | -0.5x | -0.7x |
