Motilal Oswal is bullish on this mid-cap stock; here's why

Brokerage house Motilal Oswal has maintained a 'Buy' rating on Quess Corp Limited stock with a target price of Rs 1,100 per share.
 
The stock ended 1.19 per cent higher at Rs 805.90 against the previous close of Rs 796.40 on the Bombay Stock Exchange (BSE). With a market capitalisation of more than 11,900 crore, the shares stand higher than 200 day moving averages but lower than 5 day, 20 day, 50 day and 100 day moving averages.
 
Monster.com, a Quess company, announced that it has raised Rs 137.5 crore in a funding round led by prominent industry leaders – Akash Bhanshali (Volrado Venture Partners) and Mohandas Pai (Meridian Investments) with participation from Quess.
 
"Post the funding round, the company is valued at close to $100 million. The current close has been done at Rs 112.5 crore with an option built-in to expand the round to INR 137.5 crore," Quess Corp said.
 
The company further informed that the funds raised will be utilised towards enhanced investments in Product Development & Marketing in India, SEA and Middle East markets. This investment will help Monster.com evolve from a Job-board into a Talent Platform delivering full stack experience for both candidates and companies, it said.
 
In 2018, Quess Corp acquired Monster.com’s businesses in India, Singapore, Malaysia, Philippines, Hong Kong, Vietnam, Thailand, Indonesia, UAE and the Kingdom of Saudi Arabia.
 
Motilal Oswal stated that Quess should be among the biggest direct beneficiaries in the medium term, as both the center and state governments look to liberalize and formalize the labor markets.
 
"Strong hiring trends have led to robust demand recovery. We noticed similar trends in the immediate aftermath of the GFC/demonetization – when staffing companies benefitted from positive hiring trends in certain verticals. Such a trend would likely play out over the near term, supporting business services firms such as Quess," it said.
 
"We view Monster’s expansion within the job search and training space as concerning due to the dominating presence of Naukri in this market. Given the gap in capability and branding, Monster needs to deploy this fund quickly and might require future funding to disrupt Naukri’s monopoly. Thus, we see this as a key execution risk. We are currently not factoring this in our valuation for Quess," the brokerage house added.
 
According to MarketsMojo, the stock is trading at a discount compared to its average historical valuations and it has a fair valuation. The company has a strong ability to service debt as the company has a low Debt to EBITDA ratio of 0.50 times.
 
However, the promoters have decreased their stake in the company by 3.42 per cent over the previous quarter and currently hold 51.82 per cent of the company.