Buy Polaris; target of Rs 174: Nirmal Bang

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Buy Polaris; target of Rs 174: Nirmal Bang

Nirmal Bang is bullish on Polaris Software Lab and has recommended buy rating on the stock with a target of Rs 174 in its October 28, 2011 research report.

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Nirmal Bang is bullish on Polaris Software Lab and has recommended buy rating on the stock with a target of Rs 174 in its October 28, 2011 research report.

"Polaris Software Lab has revised its FY12 revenue guidance upwards by 2.3% to $440mn-$450mn from the earlier $430mn-$440mn.EPS guidance has been revised to Rs.22.65-Rs.23.47 from the earlier Rs.21.95-Rs.22.35. This is on the back of good traction seen in Intellect and due to demerging of its subsidiary Optimus Global Services with itself."

"Revenues grew 13.2% qoq and 31% YoY at Rs.509.7crores backed by 32% qoq growth in Intellect revenues at Rs.139 crs. Services revenues grew by 7.4% QoQ. Operational margins reduced by 67 bps to 12.2%. Lower selling and general administration expenses failed to offset marginally higher development expenses. Operational margins reduced by 67 bps to 12.2%. Lower selling and general administration expenses failed to offset marginally higher development expenses. Revenues grew 13.2% QoQ on the back of good traction from Intellect. EBIDTA margins dipped 67 bps QoQ, while Profits grew 21% QoQ on the back of forex gains."

"Polaris has consistently enhancing its services basket especially through its Intellect TM. Revision in the guidance has come on the back of the demerger of its subsidiary. EBIDTA margins continue to remain under pressure, while utilization levels are at its peak. We have revised sales 6% upwards for FY12E and 3.6% for FY13E, however we maintain our earlier EPS estimate due to reduction in forex gains for FY12E and FY13E. At CMP Rs.140, the stock is trading at a 6.7x and 5.9x on FY12E and FY13E EPS repectively. We reiterate our BUY rating with a price target of Rs 174 which has a potential upside of 19%," says Nirmal Bang research report.

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To read the full report click on the attachment