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Temporary staffing company Teamlease Services Ltd reported robust December quarter earnings. Reacting to it, the stock rose around 7.5% on the National Stock Exchange in opening deals on Thursday.

Among the key highlights were the highest ever net addition of more than 15,000 associates in its key general staffing vertical, the company said in its investor presentation. Consolidated revenue rose 37% year-on-year (y-o-y) to 1,767 crore, while sequential revenue growth of 16% was ahead of consensus estimate of 8%. This was backed by strong growth in general staffing and HR services verticals.

Net profit at 30.2 crore was up 31% y-o-y. Consolidated EBIT margin came at 1.6% and the company's management expects margins in its HR services segment to improve to 10% over long term as the business scales up. Ebit is earnings before interest and tax. In the near term, margins are expected to remain flattish as investments in sales talent and technology will start yielding results and improve margins over medium term, analysts at Prabhudas Lilladher said in a report.

Sharing the demand outlook for the flexible staffing industry, the Teamlease management said sectors such as IT, healthcare and pharma, education, e-commerce and startups have the highest intent to hire. Among metros, Bangalore and Chennai are emerging as important hiring markets with demand in metros and tier-I cities improving. The management added that companies continue to intend to hire and there is no impact on sentiment due to Omicron.

Post Q3 results, analysts at Prabhudas Lilladher have upgraded their rating on the stock from reduce to accumulate given market share gains in associate additional and string operating metrics. "Our EPS estimates increase by 2.6%/0.6% for FY23-24 led by increase in revenue growth estimates. We continue to value Teamlease on 40 times multiple on Sep23 EPS of 110.7 to arrive at target price of Rs4429. (earlier: Rs4366)," added the Prabhudas report. EPS is short for earnings per share.

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