Buy Rolta India with a target of Rs 320: Karvy

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Broking house, Karvy Stock Broking is bullish on Rolta India and has recommended buy ratin on the stock with a target of Rs 320.

Karvy Stock Broking report on Rolta India:

"Rolta over the last 2 decades has emerged as a leading CAD/CAM/ GIS solutions provider and is also a leading provider of AM/FM  services, as it has executed numerous multi-million dollar projects.  At present, no other company globally offers a blend of geospatial, engineering design and e-business solutions, which gives Rolta the competitive edge in the market place. The prospective investments into India's infrastructure, energy, homeland security, and military related are expected to exceed US$350bn in the next 7 years. Besides, spending on engineering services is likely to increase substantially over the next few years, and Rolta is well poised to capitalise  on these opportunities. Consequently, we initiate coverage with a BUY rating, as we expect its earnings to grow by 42% for FY07 and around 35% CAGR for the next two years."

Valuations are coming attractive:

"Though the stock has been trading at attractive valuations visà- vis its IT services peers, the investment community was little apprehensive of its high receivables, and gearing of close to 50%. Post the GDR, the debt has been paid off and the company's efforts to reduce the receivables from a high of 320 days in FY04 to 220 in FY06 and we have been given to understand it would be reduced to 150 days over the next few years. With the business momentum likely to improve significantly, we believe there is value in the stock at the current levels. We recommend the stock as a Buy with 35% upside with a price target of Rs 320."