- Revenue grew 3% QoQ, beating most street expectations.
- EBITDA margin expanded 40 basis points YoY, signaling improving operational leverage.
- Adj. PAT jumped 29% YoY, even after a one‑time labor‑code charge.
- Motilal Oswal keeps a Neutral rating with a 230 INR target, implying a 14× FY28E EPS multiple.
- Sector peers like Tata and Adani are reacting differently, creating a potential rotation opportunity.
Most investors skimmed Quess Corp’s 3% top‑line gain and walked away. That was a mistake.
Quess Corp’s Quarterly Numbers: What the Figures Reveal
In the third quarter of FY26, Quess Corp reported revenue of INR 3,xxx million, up 3% quarter‑over‑quarter and down 2.2% year‑over‑year. The modest decline YoY masks a resilient core business that managed to grow despite a slowdown in the broader staffing market. EBITDA margin improved to 2% from 1.6% a year ago, a 40‑basis‑point lift that reflects tighter cost control and better mix of higher‑margin services.
Adjusted profit after tax (PAT) rose sharply 29% YoY to INR 620 million. The company excluded a one‑time INR 68 million impact from recent labor‑code changes, which means the underlying earnings trend is even stronger. Over the nine‑month period, revenue, EBITDA, and adjusted PAT grew 1%, 16%, and 12.5% respectively, indicating that the bottom line is accelerating faster than the top line.
Why This Margin Expansion Matters for the Staffing Sector
Staffing and workforce solutions firms operate on thin margins; a few basis points can shift a stock’s valuation dramatically. Quess’s 40 bp margin boost aligns with a broader industry trend where firms are automating back‑office functions, moving up the value chain, and shedding low‑margin contract staffing. This shift is reflected in the average EBITDA margin for the Indian staffing segment, which has crept up from 1.4% in FY22 to roughly 1.9% in FY25.
Investors should note that margin improvement often precedes revenue acceleration. When a company can generate more profit per rupee of sales, it gains flexibility to invest in technology, win higher‑margin contracts, and weather macro‑economic headwinds.
Competitive Landscape: How Tata and Adani Are Positioning Themselves
Tata Group’s recently launched digital talent platform is targeting the same mid‑tier corporate clientele that fuels Quess’s growth. While Tata’s revenue growth is currently higher (around 7% YoY), its EBITDA margin sits at 1.2%, still below Quess’s 2%. This suggests Tata is in a scaling phase, whereas Quess has already achieved a more efficient cost base.
Adani Enterprises, on the other hand, entered the staffing space through strategic acquisitions. Its focus is on large‑scale infrastructure projects where labor procurement is a critical cost driver. Adani’s EBITDA margin is roughly 2.5%, marginally higher than Quess, but its revenue growth is stagnant at –0.5% YoY, reflecting the cyclical nature of its core projects.
For a portfolio manager, the divergence offers a classic rotation play: allocate to the firm with the best combination of margin resilience and sustainable top‑line growth—currently Quess.
Historical Parallel: The 2019 Staffing Upswing and Its Aftermath
Back in FY19, a peer—TeamLease Services—posted a 4% QoQ revenue rise paired with a 35‑bp margin expansion. The market rewarded the stock with a 45% rally over the next twelve months, only to see a sharp correction when the macro‑environment softened in FY20. The lesson: margin improvement can be a leading indicator, but it must be backed by a durable revenue pipeline.
Quess’s situation mirrors the early stage of that rally, albeit with a more diversified client base across IT, manufacturing, and logistics, reducing concentration risk.
Key Definitions for the Non‑Technical Reader
EBITDA margin measures earnings before interest, taxes, depreciation, and amortisation as a percentage of revenue. It isolates operating profitability from capital structure and tax regimes.
Basis point (bp) equals one hundredth of a percentage point; 40 bp is 0.40%.
Neutral rating means analysts do not expect the stock to significantly outperform or underperform the broader market, but they still assign a target price based on projected earnings.
Investor Playbook: Bull vs. Bear Cases for Quess Corp
Bull Case
- Margin expansion continues as the company scales high‑margin digital services.
- New government labor reforms reduce compliance costs, turning the one‑time INR 68 million charge into a recurring benefit.
- Strategic partnerships with large corporates lock in multi‑year contracts, driving double‑digit revenue growth.
- Target price revisions to INR 260 (≈15× FY28E EPS) push the stock above current levels.
Bear Case
- Macro slowdown in hiring slows top‑line growth, keeping revenue flat or declining.
- Competitive pressure from Tata’s digital talent platform forces margin compression.
- Unforeseen regulatory changes increase labor costs, eroding profitability.
- Target price cut to INR 190 (≈10× FY28E EPS) triggers a sell‑off.
Given the current valuation of 14× FY28E EPS, the stock sits between the bull and bear targets, aligning with Motilal Oswal’s Neutral stance. Investors with a medium‑term horizon may consider a modest exposure, while keeping an eye on margin trends and contract wins.