Buy Oracle Financial; target of Rs 2675: Dolat Capital

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Buy Oracle Financial; target of Rs 2675: Dolat Capital

Dolat Capital is bullish on Oracle Financial Services Software and has recommended buy rating on the stock with a target of Rs 2675 in its January 27, 2012 research report.

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Dolat Capital is bullish on Oracle Financial Services Software and has recommended buy rating on the stock with a target of Rs 2675 in its January 27, 2012 research report.

"Oracle Financial declared its Q3 FY12 revenue at Rs 8.15bn (up 8% QoQ; up 10.6% YoY), below our estimates of Rs 8.67bn. Product segment revenues have increased by 15.3% QoQ and 30% YoY to Rs 6 bn. It added 12 new clients and signed new licence sale bookings worth USD 11 mn during the quarter (as against USD 9mn in Q2 FY11). Revenue from services declined 8.1% QoQ and 25% YoY to Rs 1.8bn. - added 4 new clients."

"EBIT grew 14% QoQ, driven by a strong product revenue share (In Q3FY12- 74% of overall revenues and In Q2FY12-69% of overall revenues) that supported margin expansion by 170bps QoQ to 33.2%. Segmental wise, Product business margins are at 40% as against services and BPO margins of 27% and 33% respectively. Other income has increased by 233%v from 528 mn to 1761 mn from Q2FY12 to Q3FY12 on the back of increased Interest Income (up at Rs 699 mn from 382 mn in Q2FY12) and Foreign exchange gain (up at 903 mn from a loss of Rs 16 mn in Q2FY12)."

"OFSS expects huge opportunities in three geographies - US, China and Latin America - where it is close to monetising its strong sales efforts into robust deal wins over coming quarters. We largely maintain our estimates and outlook on the stock. We expect the current deal-win momentum to sustain, leading to strong revenue growth and improved profitability in the coming period. We remain positive, with a Buy rating (Target Price: Rs 2,675), valued at 17(x) of FY13E EPS of Rs 157 (25% discount IT services tier I players)," says Dolat Capital research report.

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