Shares of SIS Ltd have surged 26% in the past six months, but analysts at Keynote Capital see the stock going further up as it notes that the company is a major potential benefactor of the rising prospects in the industry for the following 3 years.

The SIS Analyst: The Devin Joshi-led analyst team at Keynote initiated coverage on the stock with a price target of ₹837. The target indicates an around 87% upside from the stock’s last closing price of ₹447.35.

The SIS Thesis: The brokerage firm in its note released late last month said that the company is a market
leader in security solutions facility management and cash logistics in India. The analysts added that the security player is undergoing a transformation phase on the back of measures like reducing contribution from the ATM replenishment business from 65% in FY18 to 21% in FY23. The company’s EBITDA margins have also improved from 1% to 16% from FY19 to FY22.

Talking about industry growth, the brokerage firm highlighted that the Indian security services market was ₹39,000 crore in 2015 and grew at the rate of 11% CAGR (compound annual growth rate) to reach ₹91,100 crore by 2023, driven “by increasing crime rates, rising urbanization, political instability, and the need for assets and individual protection.”

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The brokerage firm said that currently, unorganised players hold a dominant market share of 65% of the Indian security services industry. However, the analysts argue that the industry is gradually moving towards the organised sector as the demand for security services evolves from traditional manpower guarding to professional and skilled guards who have the ability to cater to bulk requirements, including specialized security services, which make it hassle-free for companies and can also provide integrated electronic security solutions.

The analysts further said that the company’s leadership position, “makes it a major potential benefactor of the rising prospects in the industry for the following 3 years.”

Price Action: SIS’s share price was down 0.93% to trade at ₹443.20 on Wednesday afternoon.

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