CMP - Rs58 l TP - Rs120 l Upside - 107%
One Point One Solutions Ltd (OPOS), a prominent leader in the BPM sector catering to BFSI, Retail, New Age, and Fintech clients, is poised for substantial growth with its robust workforce of 5,600 individuals. We firmly believe that OPOS possesses the capability to effectively utilize its highly skilled and experienced management team to establish customer-centric enterprises of the future. Their recent strategic acquisition of ITCUBE Solutions aligns seamlessly with their vision to expand beyond BPM into other IT services and diversify their client base. Furthermore, OPOS aims to broaden its horizons beyond India by establishing a presence in LATAM and Southeast Asia through inorganic means, thereby positioning itself as a global player in the BPM domain. At PE of 10x FY26E EPS, stock is compelling. Considering the company's unwavering focus on business growth through global expansion, diversified verticals, and a robust trajectory of earnings growth (both organic and inorganic), we firmly believe that the stock has the potential to be rerated from its current levels. Consequently, we initiate coverage with a BUY rating and a Target Price of Rs 120.
Key highlights
- Leading BPM solutions provider with a flexible revenue model: One Point One Solutions Ltd (OPOS), a prominent leader in the BPM sector catering to BFSI, Retail, New Age, and Fintech clients. Its flexible revenue model (82% time and motion, 18% transactions) caters to diverse client needs.
- Recently OPOS Acquires ITCube for Rs 840mn, expanding its service portfolio beyond BPM into IT services, with a focus on healthcare and construction. This acquisition provides OPOS with a significant presence in the US and access to a broader client base.
- Strengthens Leadership Team for Next Growth Phase: OPOS strengthened its leadership team with the strategic appointments of Rajiv Desai as Global Delivery Head and Ashwini Kumar Rao as Chief Human Resources Officer. Desai brings over 15 years of experience in customer experience management and BFSI operations from TCS, while Rao joins with over 24 years of diverse HR experience from Sutherland Global Services.
- Spreading wings beyond India: OPOS is focusing on expanding its footprints beyond India to other geographies like S.E.Asia and LATAM. This strategy would enable company to emerge as a global BPM player with diversified revenue mix and better margins.
- Eyeing LATAM Acquisition, this could be funded through equity: While the deal size remains undisclosed, it seems the company is targeting a company in this region with a positive EBITDA of Rs 300-350mn. Even if we apply a multiple of 7-9x to its EBITDA, the acquisition price is likely to range between Rs 2-2.5bn. Presuming they do an outright cash deal, then they might have to do fund raising through equity. In our model, we have factored in one acquisition and have factored in equity dilution of 23%.
- Organic Growth and Acquisition to Propel Profits: We believe OPOS has potential to more than double its revenue to Rs 5.1bn in FY25E, driven by organic growth and inorganic route. Despite factoring in higher cost pressure in operating margin, still our earnings are multiplying by 3x in FY25E. For FY26E, we are expecting LATAM to contribute big chunk to the revenues & margins, and our earnings are multiplying by 2x over FY25E.
Compelling valuation: At PE of 10x FY26E EPS, stock is attractive. Considering the company's unwavering focus on business growth through global expansion, diversified verticals, and a robust trajectory of earnings growth (both organic and inorganic), we firmly believe that the stock has the potential to be rerated from its current levels. Consequently, we initiate coverage with a BUY rating and a Target Price of Rs 120. |
