Quess Corp shares up 9% today; stock analysts see up to 50% upside; here are target prices

Shares of Quess Corp Ltd, the largest domestic staffing company, climbed 9 per cent in Tuesday's trade, with Antique Stock Broking initiating coverage on the scrip with a buy rating and a price target that suggests 50 per cent potential upside. Quess Corp's improving outlook has set stage for further re-rating, the brokerage said. 

The stock rose 9.35 per cent to hit a high of Rs 733.15 on BSE. The stock is up 40.50 per cent in 2024 so far against a 10 per cent slide for TeamLease Services.

Quess Corp offers a wide array of services such as staffing solutions, facility management, and IT services. Antique Stock Broking said Quess Corp is a clear beneficiary of strong hiring trends across various segments.

"Increased formalisation of the economy driven by labor reforms, rise in the gig economy, capex push through PLI schemes, a higher thrust on manufacturing driven by the China + 1 strategy, low staffing penetration, and opportunities in Tier II cities are the company's key growth drivers," Antique said. 

"With the rapid urbanization in India and the rampant growth of GCCs in the country and Quess experiencing a strong momentum in the BFSI, manufacturing, telecom sectors we believe the company's revenue is expected to grow at 12-14 per cent CAGR over FY24-27. We initiate coverage on Quess Corp with BUY rating and a target price of Rs 1,000 (25x PE on FY27 EPS) which implies 50% upside
from the current price," it said.

IIFL Securities in another note said While three out of the four segments witnessed margin contraction in Q2, lower Ebitda losses in foundit drove Ebitda growth. On the call, the management highlighted growth opportunities due to hiring by GCCs and higher PAPM in GCC (at Rs 19,000) against general staffing (Rs 680-700). 

"It expects WFM segment Ebitda margin to revert to 2.6 per cent in medium-term (vs 2.4 per cent in 2Q) and overall margin to improve to 4 per cent in 2H vs 3.8 per cent in 1H. It reiterated foundit Ebitda-breakeven target for 4QFY25. We expect Quess to benefit from formalisation and industry consolidation. We cut FY25/26/27ii EPS estimates by 8 per cent/4 per cent/1 per cent due to slower-than-
expected margin recovery in WFM and OAM segments. The stock trades at ~22x 1YF PE, which is attractive in our view, considering improved capital allocation and value unlocking through the demerger (expected to be completed by 1QFY26)," IIFL said. 

The brokerage sees the stock at Rs 940. 

Quess Corp recently announced its demerger into three independent companies - Digitide (GTS), Bluspring (OAM and PLB) and Quess (WFM and the remaining businesses. Every shareholder of Quess Corp will get one additional share in each new entity i.e. the shareholding pattern after demerger will be 1:1:1. The demerger is aimed at simplifying the corporate structure, in a bid to reduce the conglomerate discount.