Dolat Capital Market's research report on Oracle Financial Services Software
OFSS reported inline results with a revenue growth of 6.8% YoY at Rs 12.4bn (DE Rs12.3bn). OPM for Q3 stood at 47.2% up 419bps YoY (up 125bps on QoQ basis), as cost efficiency got further deep. EBIT and PAT were ahead of estm at Rs 5.9bn (DE Rs5.5) and Rs4.2bn (DE 3.9bn). OFSS signed new Licenses worth US$19.1mn ahead of our estm of $16mn ($12mn in Q2FY20) that included 17 new deals across Geos including 6 in developed markets (Exhibit 6) and also witnessed 23 go-lives in the quarter. Improved deal momentum (License wins up 16% YoY for 9MFY21) led by Digital acceleration theme (Banks investing both on creating digital channels), significant savings on cost in WFH (YTD EBIT margins up 364bps) could extend the overall earnings momentum significantly. Global leadership in underpenetrated CBS business, unmatched access, superior technology, integrated & reliable offering would ensure that OFSS emerge as most preferred vendor in the segment. Superior pricing and brand appeal would mean stronger profitability, improved cash generation (FCF Yield 5%+) and generous pay-outs.
We continue to maintain OFSS as our preferred pick with Buy rating on the stock with DCF based TP of Rs4000 (implies 16x on FY23E PER).