Buy Intellect Design Arena; target of Rs 300: HDFC Securities
HDFC Securities is bullish on Intellect Design Arena has recommended buy rating on the stock with a target price of Rs 300 in its research report dated January 29, 2019.
February 07, 2019 / 01:51 PM IST
HDFC Securities' research report on Intellect Design Arena
Intellect Design Arena (INDA) posted muted quarter both on the revenue and margin front. Revenue stood at USD 52.4mn (vs our est. of USD 53.7mn), down 3.4% QoQ and 2.8% CC. Revenue fall was led by lower licence revenue (-25% QoQ, higher base effect). Order backlog remains healthy at Rs 13.88bn (+11% QoQ), which provides growth visibility. Management has guided for ~25% YoY growth for FY19E which implies strong 4Q exit (+13.5% QoQ). EBITDA margin expanded 26bps QoQ to 10.3%, stood lower than our est. of 11.7% due to 130bps QoQ drop in GM. Deal wins have been robust led by higher acceptance of Intellect products (iGTB and IDC). The company won 10 large transformational wins in 9MFY19. The deal funnel stands at healthy USD 505mn with 130 opportunities and 36 active pursuits. Cloud partnerships with global leaders like AWS, IBM Cloud etc is leading to cloud wins (subscription order book is up 16.7% QoQ to Rs 28bn).
We maintain our positive stance based on (1) Huge addressable market opportunity (2) Highly-rated and digital-ready product portfolio, (3) Healthy order book, and (4) Traction in large deal wins (iGTB). We estimate USD revenue growth of 23/16% for FY19/20E. Maintain BUY with a TP of Rs 300, assigning EV/revenue multiple of 2.0x on Dec-20E revenue.
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