Krystal Integrated Services Rs 800
‘Nobody gives a damn about maintenance as long as something is well maintained’. This was a wry quip from an underappreciated hard-working manager of a facility management company. Tough as it is for him, there is a deeper message in the quote. When flipped, it means that everybody gives a damn if something is not well maintained. And real estate developers, commercial property lessors, mall owners, movie hall exhibitors, airport authorities, now even government organizations including municipal corporations realize that good maintenance equals good business by way of higher footfalls, superior rentals, better wallet share etc.
This is where facility management companies step in. Instead of doing the upkeep themselves, property owners are increasingly outsourcing these services to such companies. Add requirement for security services, staffing, catering, regulatory compliance, ESG needs etc and there is a big, lucrative, fast growing business model right in front of you. No wonder there are now so many listed companies in this space.
Krystal Integrated Services Ltd (Krystal) is one such company. It came out with 300 cr IPO in Mar 2024 at a price of Rs 715. Its three year revenue CAGR from FY 2021 to 2024 has been 30% with much higher PAT CAGR of 72%. As per FY24 conference call, its topline is expected to grow at over 25% for next several years without dilution of margins. Interestingly, management claims that Krystal’s attrition rate (which is one of the most important metric for margins) at 17% is the lowest versus industry average of 60%.
Krystal operates in all the main service lines – Integrated Facility Management (55% revenue contribution in FY24), Staffing (30% contribution), Security (10% contribution) and Catering (3% contribution). It had a strong FY24 with Revenues, Ebitda, PAT rising at 48%, 38%, 26% respectively. Q1FY25 was even better with growth of 20%, 40%, 67%. Government business contributed 70% to topline which is a risk since all contracts are compulsorily retendered after 3-4 years.
At FY25 estimated EPS of Rs 30, it is trading at PE of 27 with low D/E of 0.22x. This compares favorably with the huge runway of above average growth for the industry with new airports and smart cities coming up, increasing outsourcing of solid waste collection and treatment by municipalities, commercial and retail space expansion etc. Krystal could turn out to be interesting in times to come if the management’s growth projections are met.