Buy Nucleus Software; target of Rs 230: Hem Securities

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Hem Securities' research report on Nucleus Software

"Nucleus Software has registered robust results for the quarter ending December 2013. Total income from operation has increased by 20.54 percent at Rs 89.96 crore for quarter under review as compared to Rs 74.63 crore for the quarter ended December 31, 2012. The increasing penetration in new markets has given a positive momentum. Operating profit climbed sharply by ~55 percent at about Rs.19.59 crores as against Rs.12.63 crores in the previous year quarter. Cost of delivery including cost of product development is 59.6 percent of revenue as against 63.4 percent of revenue in the previous quarter. The company has reported 89.68 percent rise in its net profit at Rs 23.39 crore for the quarter as compared to Rs 12.33 crore for the same quarter in the previous year."

"Revenue from product business for the quarter is at Rs. 61.41 crore against Rs. 49.67 crore, a rise of 23.63 percent y-o-y. Product revenue from own business, for the quarter is at Rs. 58.77 crore against Rs. 48.28 crore, a jump of 21.73 percent y-o-y. Projects and services business revenue for the quarter is at Rs. 28.55 crore against Rs. 24.96 crore, moved up by 14.39 percent. Revenue contribution from the top 5 clients for the quarter stood at 40 percent; similar to the preceding quarter. The geographies Africa, India and Middle East posted good growth for the quarter ended December 2013. Japan remained more or less the same."

Valuation: "With new product launches and increasing penetration in new geographies, strong market share with good customer relationships and improving productivity; Nucleus Software Exports Ltd. growth looks promising. We believe the company is trading at an attractive valuation at 9.71x and 8.21x of FY14EPS of Rs 17.60 and FY15EPS of Rs 20.82. We initiate a 'BUY' on the stock with a target price of Rs 230 (appreciation of about 35 percent) with the medium to long term investment horizon," says Hem Securities research report.

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