Prabhudas Lilladher Maintains Hold Rating, Targets Rs 4560

LTM to Acquire Randstad's Technology & Consulting Services Business

Prabhudas Lilladher's research report highlights LTM's intention to acquire Randstad's Technology & Consulting Services business in Europe and Australia for EUR 160 million (~USD 180 million), which translates to a valuation of approximately 0.34x the company's CY25 revenue of EUR 469 million (~USD 500 million). The acquisition valuation appears attractive, but the acquired business has experienced a revenue decline at a 12.2% compound annual growth rate (CAGR) during CY23-25, largely due to macroeconomic weakness in Europe and client rationalization.

The management team has indicated that the rationalization exercise is largely completed, with the top 25 clients in Europe contributing approximately 65% of revenue and the top 10 clients in Australia contributing approximately 80%. However, upon closer examination of the vertical dynamics, it appears that Manufacturing has a higher concentration mix, with Europe dominating the growth profile within marquee accounts. This scrutiny of growth within key accounts is crucial for assessing the acquisition's potential.

The near-term profitability impact of the acquisition remains a key monitorable due to the onsite-heavy delivery mix and post-integration sales and marketing (S&M) expenses. Despite this, management has highlighted that the acquired entity's onsite gross margins are superior to LTM's onsite margins, which should limit near-term earnings dilution.

Read also: Treasury Yields Experience Largest Increase in Two Weeks Following Release of Labor Market Data

Estimates and Outlook

In light of the acquisition, we await greater clarity on client revenue trends and profitability before incorporating the acquisition into our estimates. Consequently, we maintain our FY27E/FY28E estimates alongside a HOLD rating and an unchanged target price of INR 4,560.