Buy Omnitech Info; target of Rs 303: HDFC Securities

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Buy Omnitech Info; target of Rs 303: HDFC Securities

HDFC Securities is bullish on Omnitech Infosolutions and has recommended buy rating on the stock with a target of Rs 303 in its September 21, 2010 research report.

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HDFC Securities is bullish on Omnitech Infosolutions and has recommended buy rating on the stock with a target of Rs 303 in its September 21, 2010 research report.

"Omnitech Infosolutions (OISL) is planning to increase its global presence through inorganic route and is close to acquiring a company in Europe. OISL has also short-listed three more companies (1 overseas, US and 2 domestic) for acquisition. If the above acquisitions take place successfully & the synergies work well, then OISL's revenues & profits could increase significantly going forward. The overseas acquisitions would enable OISL to penetrate in the US & Europe markets, strengthen its client's base & provide it with the cross-selling opportunities."

"At CMP of Rs 254.8, OISL trades at 7.6xFY11E EPS, which is at a discount to its peers like Allied Digital (marginal discount) & Glodyne Technoserve (substantial discount) despite commanding higher OPM & similar PAT margins. This could possibly be due to its relatively smaller size of business. Exposure to Government business in the case of OISL is lesser compared to its peers like Glodyne. With leadership in the DR / BCP services & capabilities in the managed services, OISL is well placed to tap the growing opportunities. The company's IMS, AMS & PMS services provide end-to-end services under one roof, which is the biggest differentiator. Considering its decent track record & future growth prospects, we feel that OISL deserves to trade at higher valuations."

"We feel that OISL could trade at 9xFY11E EPS, which gives a price target of Rs 303. We recommend investors to buy the scrip at current levels & average it on dips in the price band of Rs 222-229 for the above mentioned price target over the next six months," says HDFC Securities research report.

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To read the full report click on the attachment