BLS International Services Limited (BLS)

26 November 2018 CMP: ₹125

Q2-FY19 Result Update Target: ₹263

 BLS International has reported a de-growth of 2.4% in its consolidated revenue at Rs.1821 million in Q2-FY19 as against Rs.1865 million in Q2-FY18. On
profitability front, the company has reported operating margins of 19.9% at Rs.363 million in Q2-FY19 as against 23.2% at Rs.433 million in Q2-FY18,
compression of 330 basis points due to lower revenue contribution from high margin value added services (Spain). The Company’s profit after tax (PAT)
margins for the quarter stood 18.1% at Rs.330 million in Q2-FY19 as against 14.4% at Rs.268 million in Q2-FY18, improvement of 376 basis points.

 BLS International marks the second quarter of FY-19 with a number of contracts and awards. It commenced servicing the French Embassy in Jordan from
August 2018. Under this project, BLS International will provide key deliverables, which will compose of approximately 25,000 France visa application in
Jordan in strategic alliance of its partner. The strategic association linked strengthened the company’s presence in Europe and Middle East.

 BLS International Services also signed an agreement with Vision Box in this quarter to cooperate in connection with specific projects or opportunities in
the territory of Portugal. An agreement was signed with premium security printing company, a company existing under the laws of Hungary in which BLS
will engage them in providing of continuous support in further operations to collaborate and pursue the tender of Ministry of Foreign Affairs, Hungary
globally.

 The company also signed an agreement with Speed Identity AB to cooperate in connection with a specific project or opportunity for the Ministry of
Foreign Affairs of Sweden, Denmark, Finland and Norway. Speed Identity is a company existing under the laws of Sweden, which is expert service provider
of biometric hardware and software products and services.

 The UK Visas and Immigration (UKVI) contract has also started from 12th Nov 2018. The company is expecting around 200,000 to 500,000 applications
annually in this contract. The company also introduced value added services including brand new ’Premium Lounge’ Service in London and Mobile
Biometric enrolment services across the United Kingdom for UK Visas and Immigration (UKVI) on 12th Nov 2018. This will add to the incremental
revenues from H2 of FY19.

 Management has commented positive outlook for FY19 as the existing contract is in mature stage. Along with this yield per application and services
provided to customer is also increasing. We continue to believe that long term growth prospects of the company remains intact. We continue to remain
positive on the stock and maintain BUY rating with target price of Rs.263.

1 Analyst: Saurabh Joshi, CA Anand Rathi Research

[email protected]
BLS International Services Limited (BLS)

Quarterly Results

Financial Results (₹ Mn.)

(In ₹ mn) Q2-FY19 Q2-FY18 Chg
Net Sales 1,821 1,865 -2.4%
Operating Expense 1,458 1,432 1.8%
EBITDA 363 433 -16.3%
Other Income 91 8
Depreciation 46 102
EBIT 408 339 20.2%
Interest 29 28
PBT 379 311 21.7%
Tax 49 43
Exceptional Items - -
PAT 330 268 23.1%

Margins
Consolidated
Margins Q2-FY19 Q2-FY18 Chg BPS
Operating Margin % 19.9% 23.2% -330
Net Margin % 18.1% 14.4% 376

Source: Company, Anand Rathi Research

2 Anand Rathi Research

BLS International Services Limited (BLS)

Financials

(In ₹ mn) FY-17 FY-18 FY-19E FY-20E (In ₹ mn) FY-17 FY-18 FY-19E FY-20E
Liabilities
Net Sales 6,349 7,891 9,903 12,636 Equity Share Capital 102 102 102 102
Reserve & Surplus 1,543 2,503 3,849 5,670
Operating Expense 5,526 6,303 7,783 9,805
Totat Shareholder's Funds 1,645 2,605 3,951 5,772
EBITDA 823 1,587 2,119 2,830
Minority Interest 1 1 1 1
Other Income 25 41 54 69
Long-Term Liabilities 487 390 390 390
Depreciation 260 396 493 651
Other Long-term Liabilities 12 15 15 15
EBIT 588 1,232 1,680 2,249
Deferred Tax Liability 14 (33) (33) (33)
Interest 55 124 136 159 Short-term Liabilities 824 1,686 2,074 2,647
Total 2,984 4,665 6,399 8,793
Misc. items - - - -
Assets
PBT 533 1,108 1,545 2,090 Net Fixed Assets 784 495 327 204
Long-Term L&A 6 6 6 6
Tax 32 143 199 269 Non Current Investments 305 278 278 278
Minority Interest (0) - - - Other Non-Current Assets - 21 21 21
Current Asset 1,888 3,866 5,768 8,284
PAT 501 965 1,346 1,821 Total 2,984 4,665 6,399 8,793

Margins FY-17 FY-18 FY-19E FY-20E (In ₹ mn) FY-17 FY-18 FY-19E FY-20E
EPS (₹) 4.9 9.4 13.1 17.7
Sales Growth % 25.7% 24.3% 25.5% 27.6% P/E (x) 25.6 13.3 9.5 7.1
P/B (x) 7.8 4.9 3.2 2.2
Operating Margin % 13.0% 20.1% 21.4% 22.4%
ROE 30.4% 37.1% 34.1% 31.5%
Net Margin % 7.9% 12.2% 13.6% 14.4% ROCE 27.2% 41.4% 38.9% 36.6%

3 Anand Rathi Research

BLS International Services Limited (BLS)

Rating and Target Price history:

BLS rating history & price chart BLS rating details

120
Target Price Share Price
Date Rating
(`) (`)
100
28-Sept-17 BUY 310 245
80 16-Nov-17 BUY 310 244
16-Feb-18 BUY 263 189
60
29-May-18 BUY 263 200

40
27-Aug-18 BUY 263 163
26-Nov-18 BUY 263 125

Source: Ace Equity, Anand Rathi Research

Source: Ace Equity, Anand Rathi Research

NOTE: Prices are as on 26th Nov, 2018 close.

4 Anand Rathi Research

BLS International Services Limited (BLS)

Disclaimer:

Research Disclaimer and Disclosure inter-alia as required under Securities and Exchange Board of India (Research Analysts) Regulations, 2014

Anand Rathi Share and Stock Brokers Ltd. (hereinafter refer as ARSSBL) (Research Entity) is a subsidiary of the Anand Rathi Financial Services Ltd. ARSSBL is a corporate
trading and clearing member of Bombay Stock Exchange Ltd, National Stock Exchange of India Ltd. (NSEIL), Multi Stock Exchange of India Ltd (MCX-SX), United stock
exchange and also depository participant with National Securities Depository Ltd (NSDL) and Central Depository Services Ltd. ARSSBL is engaged into the business of
Stock Broking, Depository Participant, Mutual Fund distributor.

The research analysts, strategists, or research associates principally responsible for the preparation of Anand Rathi Research have received compensation based upon
various factors, including quality of research, investor client feedback, stock picking, competitive factors, firm revenues.

General Disclaimer: - This Research Report (hereinafter called “Report”) is meant solely for use by the recipient and is not for circulation. This Report does not
constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual clients. The
recommendations, if any, made herein are expression of views and/or opinions and should not be deemed or construed to be neither advice for the purpose of
purchase or sale of any security, derivatives or any other security through ARSSBL nor any solicitation or offering of any investment /trading opportunity on behalf of
the issuer(s) of the respective security (ies) referred to herein. These information / opinions / views are not meant to serve as a professional investment guide for the
readers.No action is solicited based upon the information provided herein. Recipients of this Report should rely on information/data arising out of their own
investigations. Readers are advised to seek independent professional advice and arrive at an informed trading/investment decision before executing any trades or
making any investments. This Report has been prepared on the basis of publicly available information, internally developed data and other sources believed by ARSSBL
to be reliable. ARSSBL or its directors, employees, affiliates or representatives do not assume any responsibility for, or warrant the accuracy, completeness, adequacy
and reliability of such information / opinions / views. While due care has been taken to ensure that the disclosures and opinions given are fair and reasonable, none of
the directors, employees, affiliates or representatives of ARSSBL shall be liable for any direct, indirect, special, incidental, consequential, punitive or exemplary
damages, including lost profits arising in any way whatsoever from the information / opinions / views contained in this Report. The price and value of the investments
referred to in this Report and the income from them may go down as well as up, and investors may realize losses on any investments. Past performance is not a guide
for future performance. ARSSBL does not provide tax advice to its clients, and all investors are strongly advised to consult with their tax advisers regarding taxation
aspects of any potential investment.

Continued…

5 Anand Rathi Research

BLS International Services Limited (BLS)

Disclaimer:

Contd.

Opinions expressed are our current opinions as of the date appearing on this Research only. We do not undertake to advise you as to any change of our views
expressed in this Report. Research Report may differ between ARSSBL’s RAs and/ or ARSSBL’s associate companies on account of differences in research methodology,
personal judgment and difference in time horizons for which recommendations are made. User should keep this risk in mind and not hold ARSSBL, its employees and
associates responsible for any losses, damages of any type whatsoever.

ARSSBL and its associates or employees may; (a) from time to time, have long or short positions in, and buy or sell the investments in/ security of company (ies)
mentioned herein or (b) be engaged in any other transaction involving such investments/ securities of company (ies) discussed herein or act as advisor or lender /
borrower to such company (ies) these and other activities of ARSSBL and its associates or employees may not be construed as potential conflict of interest with respect
to any recommendation and related information and opinions. Without limiting any of the foregoing, in no event shall ARSSBL and its associates or employees or any
third party involved in, or related to computing or compiling the information have any liability for any damages of any kind.

Details of Associates of ARSSBL and Brief History of Disciplinary action by regulatory authorities & its associates are available on our website i. e. www.rathionline.com

Disclaimers in respect of jurisdiction: This report is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or
located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation or which would
subject ARSSBL to any registration or licensing requirement within such jurisdiction(s). No action has been or will be taken by ARSSBL in any jurisdiction (other than
India), where any action for such purpose(s) is required. Accordingly, this Report shall not be possessed, circulated and/or distributed in any such country or jurisdiction
unless such action is in compliance with all applicable laws and regulations of such country or jurisdiction. ARSSBL requires such recipient to inform himself about and to
observe any restrictions at his own expense, without any liability to ARSSBL. Any dispute arising out of this Report shall be subject to the exclusive jurisdiction of the
Courts in India.

Copyright: - This report is strictly confidential and is being furnished to you solely for your information. All material presented in this report, unless specifically indicated
otherwise, is under copyright to ARSSBL. None of the material, its content, or any copy of such material or content, may be altered in any way, transmitted, copied or
reproduced (in whole or in part) or redistributed in any form to any other party, without the prior express written permission of ARSSBL. All trademarks, service marks
and logos used in this report are trademarks or service marks or registered trademarks or service marks of ARSSBL or its affiliates, unless specifically mentioned
otherwise.

Contd.

6 Anand Rathi Research

BLS International Services Limited (BLS)

Disclaimer:

Contd.

Statements on ownership and material conflicts of interest, compensation - ARSSBL and Associates

Answers to the Best of the knowledge

Sr. and belief of the ARSSBL/ its
Statement
No. Associates/ Research Analyst who is
preparing this report

ARSSBL/its Associates/ Research Analyst/ his Relative have any financial interest in the subject company? Nature of Interest (if applicable), is given
1 against the company’s name?. NO
ARSSBL/its Associates/ Research Analyst/ his Relative have actual/beneficial ownership of one per cent or more securities of the subject company, at the
2 end of the month immediately preceding the date of publication of the research report or date of the public appearance?. NO

ARSSBL/its Associates/ Research Analyst/ his Relative have any other material conflict of interest at the time of publication of the research report or at
3 the time of public appearance?. NO
4 ARSSBL/its Associates/ Research Analyst/ his Relative have received any compensation from the subject company in the past twelve months. NO
ARSSBL/its Associates/ Research Analyst/ his Relative have managed or co-managed public offering of securities for the subject company in the past
5
twelve months.
NO
ARSSBL/its Associates/ Research Analyst/ his Relative have received any compensation for investment banking or merchant banking or brokerage
6 services from the subject company in the past twelve months. NO
ARSSBL/its Associates/ Research Analyst/ his Relative have received any compensation for products or services other than investment banking or
7 merchant banking or brokerage services from the subject company in the past twelve months. NO

ARSSBL/its Associates/ Research Analyst/ his Relative have received any compensation or other benefits from the subject company or third party in
8 connection with the research report. NO
ARSSBL/its Associates/ Research Analyst/ his Relative have served as an officer, director or employee of the subject company.
9 NO
10 ARSSBL/its Associates/ Research Analyst/ his Relative has been engaged in market making activity for the subject company. NO

7 Anand Rathi Research