Buy Allied Digital; target of Rs 200: Sushil Finance

6799 Investors following Allied Digital. Share this News with them.

0

Like this story, share it with millions of investors on M3

Buy Allied Digital; target of Rs 200: Sushil Finance

Sushil Finance is bullish on Allied Digital Services (ADSL) and has recommended buy rating on the stock with a target of Rs 200 in its February 11, 2011 research report.

Post your opinion here

 

0

Tweet

Share on Tumblr

RELATED NEWS Buy PTC India; target of Rs 115: Prabhudas Lilladher Accumulate Bharati Shipyard; target of Rs 183: P Lilladher Accumulate MOIL; target of Rs 426: Angel Broking ALSO READ See previous views by Sushil Finance See what other Experts & Brokerages are saying about Allied Digital See messages about Allied Digital Allied Digital BSE | NSE 31/05/12 Are Mutual Funds betting on Allied Digital?

Sushil Finance is bullish on Allied Digital Services (ADSL) and has recommended buy rating on the stock with a target of Rs 200 in its February 11, 2011 research report.

"Allied Digital Services (ADSL) has delivered disappointing results with its Consolidated Revenues registering a drop of 10.8% QoQ & 2.9% YoY during Q3FY11. The QoQ drop in Revenues can be attributed to a sharp 20.6% QoQ decline in its solution business Revenues to Rs 700 million along with lower than expected Revenues from its IMS business, especially from Enpointe Global Services (EPGS), which delivered USD 10.1 million revenues in Q3FY11 against USD 10.8 million in Q2FY11. Its consolidated EBITDA declined 35.1% QoQ & 24.7% YoY to Rs 268.7 million, while its EBITDA margins fell by 570 bps QoQ to 15.5%. The sharp drop in margins was mainly due to one-time provisioning of Rs 75.3 million for doubtful debts. Hence, its consolidated APAT declined by 30.6% QoQ & 24.1% YoY to Rs 206.3 million."

"ADSL's share price has dropped substantially in recent days, primarily due to negative market sentiments following the I-Tax survey on its premises. Negating some of the rumors doing rounds following the I-Tax action, the management clarified that "The unsubstantiated media allegations of financial misconduct are false and speculative. A routine survey was conducted by the Income-Tax department, wherein the I-T department randomly picks a company to verify and assess their books of accounts and ensure credibility. Confident of our credibility, we offered complete support and cooperation to the I-T officials, presenting them with the required documents and records of our transactions. After verification and analysis, the I-T officials have found the documents satisfactory and the survey was concluded by the end of day." We believe impact of the aforesaid event along with disappointing results & overall negative market sentiments is overdone and expect the stock to bounce back as the above rumors wane & its performance comes back on track from Q4FY11 onwards."

"Going forward, in view of 9MFY11 performance, its revised FY11 guidance and slower growth expectation in FY12 due to lower contribution from solutions biz, we have reduced our FY11E & FY12E Revenues and APAT estimates. However, with its strong business model & service offerings, we expect ADSL to bounce back from FY12 onwards. We now expect its FY11E & FY12E Revenues to grow by 9.1% & 6.8% respectively, its PBT (including Other Income) to grow by 5.3% & 14.7% and APAT to grow by 2.4% & 6.9% in FY11E & FY12E respectively. At the CMP of Rs 78, the stock is available at a very attractive valuation of 3.3x & 3.1x its FY11E & FY12E earnings of Rs 23.4 & Rs 25 respectively. We maintain our "BUY" rating with a reduced target price of Rs 200 (8x FY12 AEPS)," says Sushil Finance research report.

Disclaimer: The views and investment tips expressed by investment experts on moneycontrol.com are their own, and not that of the website or its management.Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

To read the full report click on the attachment