Buy Oracle Fin Serv; target of Rs 4000: Religare

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Religare's research report on Oracle Fin ServOFSS’s Q3 revenues grew 8.8% YoY to Rs 10.2bn, missing RCMLe of Rs 10.6bn led by softness in services and the KPO service line. However, growth was supported by a 14% YoY increase in product revenues (84% of revenue), which saw new license sales surge 58% YoY to US$ 23mn. OFSS has seen consistent new license growth over the past five quarters and we expect this to translate into better implementation growth ahead. We maintain BUY and roll over to a Mar’17 TP of Rs 4,000 (from Rs 4,400) set at 20x one-year fwd. P/E (21x earlier).While OFSS has registered strong growth recovery in license sales, lower conversion to implementation remains a concern. Overall, OFSS remains a high-quality product company and recovery in new license sales is enhancing revenue visbility. We believe premium valuations of 20x FY17 P/E are likely to sustain given the company’s strong returns profile and new license traction. We adjust down our estimates for lower Q3 growth and roll over to a Mar’17 TP of Rs 4,000 (from a Sep’16 TP of Rs 4,400) set at 20x forward P/E. Maintain BUY.For all recommendations, click here Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

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