BLS International jumped nearly 80% in a year; is there more upside ahead? Here’s what Nuvama says

Brokerage firm Nuvama is optimistic about BLS International Services, a visa consultancy services provider, following its impressive 78 percent growth over the past year. It attributes this outlook to BLS International's strong financial performance, enhanced value-added services, expanding digital offerings, and robust cash flow generation.

Initiating coverage with a ‘buy’ recommendation, Nuvama set a target price of ₹518, suggesting a potential upside of more than 37 percent.

BLS International Services (BLSIN), established in 2005, specialises in tech-enabled visa, consular, and citizen services for governments worldwide. Nuvama highlighted that in FY24, the company derived 81 percent of its revenue from global visa and consular services and 19 percent from digital services like e-governance and banking/business correspondent services.

It further stated that ranked among the top three global visa application outsourcing firms, BLSIN operates in 66 countries, serving 46 government clients with a 12 percent market share as of 2023. Originally partnering with the Portugal embassy, BLSIN has expanded significantly, securing renewals of major contracts amid rising travel demand, poised to expand its market footprint. To fuel growth, BLSIN is enhancing its government-to-citizen (G2C) and banking correspondence (BC) services, leveraging its asset-light and capital-efficient model, added the brokerage.

Projected for FY24-26E, Nuvama anticipates a sales/EBITDA/PAT CAGR of 30 percent/44 percent/35 percent and expects EBITDA margins to improve by 473 bps to 25.3 percent, driven by visa business expansion, e-service growth, and integration of IDATA and ASPL. Effective capital allocation will be critical for maximising returns, leveraging the company's strong cash flow generation.

Stock Price Trend

In 2024 year-to-date (YTD), the stock has risen over 18 percent, giving positive returns in 4 of the 7 months so far.

The stock has shown notable volatility in recent months, reflecting its fluctuating performance. After gaining 31.5 percent in January and then declining by 13 percent in February, it further lost 14.5 percent in March. April saw a recovery with a 12 percent gain, followed by a significant setback of over 11 percent in May. June marked a strong rebound with a 13 percent increase, and July continued this upward trend with a 7.5 percent rise so far. These fluctuations highlight the stock's dynamic movement, impacted by various market conditions and investor sentiment throughout the year.

BLS stock hit its record high of ₹430 in February 2024. Currently trading at ₹377, it is over 12 percent away from its peak. Meanwhile, it has soared 78 percent from its 52-week low of ₹212, hit in July 2023.

Investment Rationale

Established player: Nuvama highlighted BLS International Services (BLSIN) as a leading player in the visa services sector, which boasts high entry barriers within a $2.6 billion industry. Globally, dominance is concentrated among a few players, with BLSIN holding a significant share alongside others like VFS Global and TLSContact. With only 40 percent of the total visa market outsourced currently, up from 22 percent in 2010, the industry shows substantial growth potential. BLSIN, established in 2005, operates in 66 countries, serving 46 government clients and processing over 65 million applications. Recent strategic expansions include securing renewed contracts globally and acquiring iDATA in Turkey, enhancing its service capabilities.

Value-added services: Nuvama also pointed out that the company focuses on value-added services (VAS), including translation and mobile visa services, which have grown significantly from comprising 20-25 percent of the contract value in FY19 to an expected 50-55 percent in the medium to long term. This shift is set to bolster revenue and profitability.

Digital services: Nuvama stated that BLSIN has integrated its e-governance and banking correspondent (BC) businesses into digital services, targeting government-to-citizen (G2C) services across several Indian states. This expansion aligns with the Digital India initiative, offering essential public services and social welfare schemes, bolstering both B2B and B2C segments. The B2C business has expanded notably post the acquisition of Zero Mass Pvt Ltd, increasing touchpoints and driving revenue and margin growth.

Valuation and View

"As the sole listed Indian entity in global visa processing and the G2C services outsourcing market, BLSIN leverages a business model that is asset and capital-light, ensuring strong cash generation with minimal growth-related cash consumption. New contracts in the visa sector can substantially boost revenue. Expansion in digital services and new touchpoints across India are expected to boost BC revenue and enhance profitability through VAS," said Nuvama.

It further highlighted that BLSIN has a strong track record of acquisitions, enhancing its product offerings and enabling entry into newer markets. The potential for greater dividend payouts is notable despite the uncertainty of securing new contracts.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.