Staffing Demand And GCC Expansion Will Drive Long-Term Upside Potential

Catalysts

About Quess

Quess provides technology enabled workforce and staffing solutions across general staffing, professional staffing, overseas staffing and digital platforms.

What are the underlying business or industry changes driving this perspective?

• Sustained expansion of India’s formal workforce and rising consumption in manufacturing, BFSI, e commerce and retail are driving structurally higher demand for large scale, compliant staffing partners. This is positioning Quess to compound associate volumes and revenue over many years.
• Acceleration in global capability centers and technology led projects, where roughly three fourths of Professional Staffing head count is already tied to GCC mandates, supports premium pricing and higher realization per associate. This is structurally lifting EBITDA margins and earnings.
• Rapid growth of higher margin manufacturing apprenticeship, value added services and construction staffing within General Staffing is gradually improving the business mix. This supports steady PAPM improvement and margin expansion even if overall head count growth remains moderate.
• Scaling international operations in the Middle East and Southeast Asia, with local hiring and diversification beyond Singapore, is driving double digit head count growth and mid single digit EBITDA margins. This is adding a growing profit stream and de risking consolidated earnings.
• Digital platforms like Hamara Jobs and Taskmo are creating a proprietary talent funnel in the blue and gray collar ecosystem. This is lowering sourcing costs, improving fulfillment speed and ultimately supporting better revenue conversion and net margin resilience.

Assumptions

This narrative explores a more optimistic perspective on Quess compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts. How have these above catalysts been quantified?

• The bullish analysts are assuming Quess's revenue will grow by 13.6% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 0.3% today to 1.9% in 3 years time.
• The bullish analysts expect earnings to reach ₹4.2 billion (and earnings per share of ₹28.56) by about December 2028, up from ₹487.0 million today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as ₹3.7 billion.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 23.1x on those 2028 earnings, down from 64.2x today. This future PE is lower than the current PE for the IN Professional Services industry at 26.6x.
• The bullish analysts expect the number of shares outstanding to grow by 0.42% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 13.17%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• General Staffing remains a very low margin engine at roughly 1.4 percent EBITDA despite scale and technology investments. Any slowdown in festive or consumption-led hiring, or an inability to structurally lift PAPM from the current INR 670 to INR 680 range, could cap operating leverage and leave consolidated EBITDA margins close to 2 percent, limiting long-term earnings growth.
• The business mix is increasingly dependent on GCC-led Professional Staffing and select high margin international markets, and management has already had to sunset a large MSP program and rationalize low margin contracts. If cost optimization, automation and AI adoption at large clients reduce seat counts or pricing power, revenue per associate and overall EBITDA margins could fall back from current double-digit levels in that segment, pressuring group earnings.
• International growth is helping offset weakness in Singapore, but head count and profitability are concentrated in a few regions such as the Middle East, Malaysia and the Philippines. Any macro slowdown, regulatory changes around local hiring or geopolitical disruption in these markets could stall head count growth and compress the 6.2 percent overseas EBITDA margin, weighing on consolidated revenue and net margins.
• The blue and gray collar digital platforms, Hamara Jobs and Taskmo, are still loss making and are being used primarily as sourcing engines. If user growth does not translate into meaningful monetization or if competitive platforms erode engagement, the company may continue to absorb recurring operating losses and incremental technology spend without a commensurate uplift in revenue or net profit.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The assumed bullish price target for Quess is ₹446.37, which represents up to two standard deviations above the consensus price target of ₹349.11. This valuation is based on what can be assumed as the expectations of Quess's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of ₹453.0, and the most bearish reporting a price target of just ₹280.0.
  
• In order for you to agree with the more bullish analyst cohort, you'd need to believe that by 2028, revenues will be ₹222.2 billion, earnings will come to ₹4.2 billion, and it would be trading on a PE ratio of 23.1x, assuming you use a discount rate of 13.2%.
  
• Given the current share price of ₹209.51, the analyst price target of ₹446.37 is 53.1% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.