Buy BLS International Services; target of Rs 230: HDFC Securities

BLS  International  posted  muted  set  of  numbers  in 4QFY18, but the new contract  win from United Kingdom Visas & Immigration (UKVI) with strategic alliance with Sopra Steria (French IT company) is a game changer. The total contract  value for BLS is GBP 110mn (Rs 100bn) over three year period with margin  of  ~22%.  The  UK  contract  is  bigger  than Spain and will start contributing from Oct-18. BLS will open 60 offices (capex of GBP 1mn) in UK and  process  ~0.5mn  visa  (renewals)  at  average  realization  of  GBP 80/application. We have assumed Rs 1.64/3.37bn revenue from UK in FY19/20E.


We  like  the  visa  segment  which  is  a  lucrative  business  with  huge addressable  opportunity,  scope  for  market share gain, asset-light model with  higher return ratios. In view of the large UK contract win and growth visibility  in  visa  business,  we upgrade BLS to BUY with a TP of Rs 230, based  on  20x FY20 EPS. We increase our revenue estimate by 28/54% and PAT est.  by 11/30% for FY19/20E. We expect Rev/EBITDA/PAT CAGR of 15/7/13% for FY18-20E.