Buy Nucleus Software Exports; target of Rs 390: Dolat Capital

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26 Aug, 2025 12:21

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Dolat Capital's research report on Nucleus Software Exports

Due to COVID-19 spread, Nucleus expects there is potential that some of its clients can come under immense difficulties – pressure of defaults and cash-flow disturbances due to rescheduling (moratorium-led). This coupled with pressure of lower demand for retail loans due to job losses, salary cuts and the general sentiment. As a results financial institution mindset could change from ‘purchasing for growth’ to ‘purchasing for survival’. While there is an expectation of demand is expected to decline as per various industry experts in CY20, Nucleus remains hopeful for potential opportunity given archaic systems used by banking institutions (consequences of decades of investment as new waves of tech came and often went) which is very difficult to maintain, costly and risky. Increased pressures from Central authorities is mounting; for example, in Oct’19, UK published a report following series of high profile disruptions in financial services firms that the frequency of disruption and consumer harm because of it; is unacceptable. The competition from Fintechs that have built their tech from scratch could take a much customer-oriented, mobile-first, experience-driven approach will also force banks to continue to invest in technology. Overall confidence continues as Nucleus software enables 200bn$ of loan management; 26mn transactions processed per day across 200 customers spread over 50 countries. In FY20, added about 50 customers for its FinnOne Neo Cloud.

Outlook

Profitability is likely to remain resilient as company has taken several cost measures such as compensation cut by Sr mgmt. team, no wage hikes and savings on travel/operational front and maintain our Buy rating with DCF based TP of Rs 390 per share (implies 1x on EV/Sales and 6x on EV/EBIT on FY22E).

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