FSL or Firstsource solutions is a good quality company for long-term holding. Company is in the business of Business Process outsourcing which is having a great future.
In recent time, stock of FSL has seen multiple breakouts which is considered good for traders to make long positions. From levels of Rs 40, stock is now trading around Rs 70. In range of 40, stock was trading for nearly 3 years. However, Budget 2018 proved to be a trend changing event for this stock also.
From the image given above, you can easily see that on 2 Feb, Stock had seen closing around Rs 38. After that, it never again saw that level and now it is trading almost 90 percent up.
In last few months, there has been a drastic change in market trend. Previously, value Investing/Potential Buy was the core ruling method of investing for short-term. But after Budget, this trend has shifted and now investing in Quality stocks where risk is very low is the new trend.
Fundamentally, FSL is strong and has good future. But the only problem is that FSL has not seen any good growth in last four quarters. In Q4 of FY17, revenue and profit of company was Rs 864 cr and Rs 65 cr, respectively. In Q4 of FY18, revenue is again around Rs 871 cr and Profit at around Rs 93 cr. So, from these numbers, it is very clear that company has not been able to tap the growth of BPO services in last one year. However, company has been able to improve its margin rate. But despite of this subdued growth, stock of FSL was a value buy at around Rs 40. Against quarterly turnover of around Rs 850 cr, market capital of company was just Rs 2500 cr which seems too low when the FSL is earning PAT at the rate of 11 percent margin of total turnover.
In FSL, Maximum target which is achievable as a potential buy in short term is Rs 100. Before, it was a target for next 1–2 years. But now by watching the kind of momentum it is getting, it looks that it would achieve it possibly before July.
So, overall I would say that those who are holding FSL from lower levels can still hold it for some more time until it reaches Rs 100. However, to avoid current market volatility, I would recommend to those who have a short term view to keep profit booking at higher levels and take a complete exit at Rs 100.
Those, who are thinking to buy FSL at current levels from a trading purpose may go ahead. But use a stoploss in FSL as it could be very risky.
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