Krystal Integrated Services Stock Surges Nearly 9% as Nuvama Recommends ‘Buy’

Krystal Integrated Services, a top facilities management company in India, saw its stock jump nearly 9% after Nuvama started coverage with a ‘buy’ recommendation. Krystal, which manages services across healthcare, education, public administration, airports, railways, metro infrastructure, and retail, listed on the Indian secondary market on March 21 at ₹713, close to its IPO price of ₹715.

Since listing, the stock has grown modestly and is now trading 14% higher than its issue price. Nuvama Professional Clients Group believes the stock has significant growth potential, noting that it’s trading at a discount compared to its peers.

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Comprehensive Service Provider

Krystal offers a range of facilities management services, including:

• Soft Services: Housekeeping, sanitation, landscaping, and gardening
• Hard Services: Mechanical, electrical, and plumbing maintenance
• Specialized Services: Waste management, pest control, and facade cleaning
• Additional Services: Production support, warehouse management, and airport management

This broad service range allows Krystal to serve various sectors with a wide geographic reach, making it a one-stop solution for clients.

Positioned for Industry Growth

Krystal earns 77.6% of its revenue from government contracts, making it a strong player in the industry. The revenue breakdown is:

• Integrated Facilities Management Services (IFMS): 54.7%
• Staffing Services: 31.7%
• Security Services: 10.7%
• Catering Services: 2.9%

Nuvama highlights that Krystal’s success with large, multi-location government contracts positions it well to benefit from the growing trend of government outsourcing facility management services.

The outsourced government IFM market was valued at ₹49,295 crore in FY23 and is expected to grow at a 16.3% CAGR to ₹1,04,731 crore by FY28. The outsourced government staffing segment is projected to reach ₹37,372 crore by FY28, growing at a 20.7% CAGR from FY23 to FY28, according to F&S analysis.

Krystal’s expertise in healthcare, education, and infrastructure projects, which make up about 55% of its revenue, is expected to drive long-term growth as it continues to excel in these areas.

Growing and Retaining Clients

Operating exclusively on a B2B model, Krystal uses its wide range of services to attract and retain clients. The company served 262, 277, 326, and 369 clients in FY21, FY22, FY23, and FY24, respectively, and onboarded 76, 70, 89, and 57 new clients in the same periods. The number of locations served increased from 1,962 to 2,487.

Krystal’s commitment to quality has led to long-term relationships, with four of its top ten clients in FY23 having partnered with it for over a decade.

Strong Future Growth

Nuvama expects Krystal’s revenue to grow at a 27% CAGR from FY24 to FY26, driven by strong client additions, aggressive bidding for profitable government contracts, and gaining market share from smaller providers.

The brokerage anticipates the EBITDA margin will improve by 93 basis points over FY24 to FY26, benefiting from increased scale and higher contributions from the high-margin catering business. They project PAT to grow at a 39.6% CAGR over the same period, driven by strong operational performance.

At the current market price, Krystal’s stock is trading at 11.1x/7x FY26 estimated earnings/EBITDA, which is lower than peers with similar services. Given the strong earnings outlook and discounted valuation, Nuvama remains optimistic about Krystal’s future.