Krystal Integrated Services stock zooms nearly 9% as Nuvama initiates coverage with ‘buy’, sees 68% upside

The company's expertise in healthcare, education, and infrastructure projects, which together constitute approximately 55% of the company's revenue, is expected to drive long-term growth as the company leverages its focused business model and enhanced government project execution capabilities.

A Ksheerasagar
First Published25 Jun 2024, 11:52 AM IST
The brokerage expects the company's revenue to grow at a 27% CAGR over FY24–26E, driven by strong client additions, aggressive bidding for profitable government contracts, and market share gains from smaller, single-service providers.
The brokerage expects the company’s revenue to grow at a 27% CAGR over FY24–26E, driven by strong client additions, aggressive bidding for profitable government contracts, and market share gains from smaller, single-service providers.(Pixabay)

Shares of Krystal Integrated Services climbed 8.5% to 883.90 apiece in today's intraday trade after domestic brokerage firm Nuvama Professional Clients Group initiated coverage on stock with a target price of 1,369 per share, indicating a significant upside of 68% from the stock's latest closing price of 814 apiece

Krystal Integrated Services, a leading integrated facilities management services company in India, specialises in diverse sectors such as healthcare, education, public administration, airports, railways, metro infrastructure, and retail. The company entered the Indian secondary market on March 21 at a listing price of 713, closely aligned with its IPO price of 715.

Also Read | Why FMGC giant Britannia Industries shuts its iconic Taratala factory in Kolkata

Since its listing, the stock has shown modest growth and is currently trading 14% higher than its issue price. However, Nuvama Professional Clients Group's projections suggest that the stock is poised for substantial growth, as it believes the stock is trading at a discount compared to its peers.

One-stop solution provider for its clients

The company's integrated facilities management services encompass soft services like housekeeping, sanitation, landscaping, and gardening; hard services such as mechanical, electrical, and plumbing maintenance and other specialised services including solid, liquid, and biomedical waste management, pest control, and facade cleaning.

Also Read | Amara Raja share price soars 20% after subsidiary signs licensing deal with GIB

Additionally, it provides production support, warehouse management, and airport management services. This diverse service portfolio allows the company to cater to a wide range of sectors with a large geographic footprint, making it a one-stop solution provider for its clients.

Well-positioned to capitalise on favorable industry dynamics

With 77.6% of its revenue sourced from government contracts, the company stands as a robust player in the industry. The company's revenue composition is as follows: 54.7% from Integrated Facilities Management Services (IFMS), 31.7% from Staffing Services, 10.7% from Security Services, and 2.9% from Catering Services.

According to the brokerage, the company's proven track record in executing large, multi-location government contracts positions it uniquely to benefit from the increasing outsourcing of facility management services by the government.

The outsourced government IFM market was valued at 49,295 crore in FY23 and is expected to grow at a 16.3% CAGR to reach 1,04,731 crore by FY28. Specifically, the government outsourced staffing segment is projected to touch 37,372 crore by FY28, with a CAGR of 20.7% over FY23–28, the brokerage said citing F&S analysis.

The company's expertise in healthcare, education, and infrastructure projects, which together constitute approximately 55% of the company's revenue, is expected to drive long-term growth as the company leverages its focused business model and enhanced government project execution capabilities.

Retaining, strengthening, and growing its client base

Operating exclusively on a B2B model, Nuvama said the company leverages its extensive service portfolio to provide bespoke solutions that enhance customer acquisition and retention. It said the company serviced 262, 277, 326, and 369 clients in FY21, FY22, FY23, and FY24, respectively, and onboarded 76, 70, 89, and 57 new clients in the same periods.

The number of locations served has increased from 1,962 to 2,487. The company's commitment to quality has resulted in long-term relationships, with four of its top ten clients in FY23 partnering with it for over a decade, it noted.

Strong growth ahead

The brokerage expects the company's revenue to grow at a 27% CAGR over FY24–26E, driven by strong client additions, aggressive bidding for profitable government contracts, and market share gains from smaller, single-service providers.

It expects the EBITDA margin to expand by 93 bps over FY24–26E, benefiting from scale and increased contribution from the high-margin catering business. Further, it projects the PAT to grow at a 39.6% CAGR over FY24–26E, fueled by robust operational performance.

At the current market price (CMP), the stock is trading at 11.1x/7x FY26E earnings/EBITDA, presenting a discount compared to peers with similar service profiles. Given the strong earnings visibility and discounted valuations, the brokerage maintains an optimistic outlook on the company.

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.

Catch all the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.MoreLess

News in Numbers

Numbers that help you understand news better
1.4%

₹773 Cr

₹2,705 Cr

₹1 Cr

₹14,370 Cr

₹5.74 T

First Published:25 Jun 2024, 11:52 AM IST
HomeMarketsStock MarketsKrystal Integrated Services stock zooms nearly 9% as Nuvama initiates coverage with ‘buy’, sees 68% upside

Most Active Stocks

NTPC

379.05
09:52 AM | 15 JUL 2024
1.8 (0.48%)

Tata Steel

166.95
09:52 AM | 15 JUL 2024
-1.75 (-1.04%)

Bharat Electronics

331.60
09:52 AM | 15 JUL 2024
-1.7 (-0.51%)

Indian Oil Corporation

168.20
09:52 AM | 15 JUL 2024
1.3 (0.78%)
More Active Stocks

Market Snapshot

  • Top Gainers
  • Top Losers
  • 52 Week High

CE Info Systems

2,641.05
09:50 AM | 15 JUL 2024
220.45 (9.11%)

Vardhaman Textiles

567.35
09:50 AM | 15 JUL 2024
45.65 (8.75%)

Godfrey Phillips India

4,409.05
09:50 AM | 15 JUL 2024
348.25 (8.58%)

Route Mobile

1,906.95
09:50 AM | 15 JUL 2024
134.6 (7.59%)
More from Top Gainers

Recommended For You

    More Recommendations

    Gold Prices

    • 24K
    • 22K
    Bangalore
    74,771.00290.00
    Chennai
    73,827.00-145.00
    Delhi
    73,972.00-799.00
    Kolkata
    74,045.0073.00

    Fuel Price

    • Petrol
    • Diesel
    Bangalore
    102.86/L0.00
    Chennai
    100.75/L-0.01
    Kolkata
    104.95/L0.00
    New Delhi
    94.72/L0.00
    OPEN IN APP
    HomeMarketsPremiumInstant LoanMint Shorts