Buy Polaris Tech; target of Rs 202: BP Equities

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Buy Polaris Tech; target of Rs 202: BP Equities

BP Equities is bullish on Polaris Tech and has recommended buy rating on the stock with a target of Rs 202 in its January 24, 2012 research report.

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BP Equities is bullish on Polaris Tech and has recommended buy rating on the stock with a target of Rs 202 in its January 24, 2012 research report.

"Polaris Financial Technology Limited (PFTL) incorporated in 1993, headquartered in Chennai has a strong global footprint and primarily focuses on Banking and financial services (BFSI) vertical. It offers comprehensive portfolio of products, services and consulting services to BFSI clients globally. The company offers IntellectTM which, is a first pure play Service Oriented Architecture (SOA) based application suite serving retail, corporate, investment banking and Insurance clients. The IntellectTM suite has grown strongly since the last five years of inception, going forward we believe it to continue and contribute significantly to company's top line and profitability."

"Polaris 'Intellect' based on Service Oriented Architecture (SOA) caters efficiently to Core bank software demand. It provides an efficient web based real-time modular software solution with excellent user interface which enables clients flexibility and customization in respect to their specific requirement and fulfils the criteria of a standardized platform. It also provides a multi-entity solution that can be accessed across countries offering a 360-degree view of a customer and provide a holistic view of data which differentiates it from others. Moreover it does not have the rigidity faced by 'Bank In Box' software products solutions like Flexcube, Finacle, BaNCS. We believe strong features and flexibility offered by Intellect will attract clients in the BFSI space and will drive growth for the company going forward. Polaris has a strong base of clients which includes eight out of top 10 financial firm globally. Citibank is the largest client and contributes ~40% to total revenues. 'Intellect' has strong deal pipe line which currently stands at ~US$550mn. We believe RBI deal win of US$55 mn is a big breakthrough which will enable the company to win more deals from PSU and Private Banks in India going forward. We expect Polaris investment in IdenTrust will boost its cloud-computing initiatives, as it would remove major regulatory hurdles which are required for winning Cloud deals globally."

"We believe Polaris will deliver strong revenue growth in products business (27.5% of total revenues) due to strong deal pipeline and decent product portfolio. The services business is expected to grow at 15% CAGR and have margins in lower double digits. However products business which has higher margins in tune of 20-25% and high growth will help the company expand margins going forward. We estimate FY12E and FY13E top line to grow 34.3% and 16.2% Y-o-Y to Rs 21.3 bn and Rs 24.7 bn respectively. The stock currently trades at a P/E of 6.0x and 5.0x FY12E and FY13E earnings which we think is at a discount to its peers considering its high growth rate, strong deal pipeline and high cash and cash equivalents reserve of Rs 4.19 bn (~30% of market cap) . We initiate the company with a "BUY" rating and a target price of Rs 202 (48.5% upside) around ~7.5x times FY13E earnings," says BP Equities research report.  

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