Dolat Capital is bullish on Oracle Financial Services Software has recommended buy rating on the stock with a target price of Rs 4220 in its research report dated August 08, 2019.
Dolat Capital's research report on Oracle Financial Services Software
OFSS reported strong Q1FY20 results with a new licence signings of US$29mn in the quarter. It signed 11 new deals in the quarter and included one OBP deal from a leading Australian Bank. The revenues were below our estimate due to weak implementation revenues in the quarter (down 10% on YoY basis) but is expected to pick up given strong 14% growth on TTM basis in its Licence revenue stream. EBIT for the quarter was inline while PAT slip was largely on account of adverse FX. We believe that the revenue momentum would improve furthermore as implementation revenues ramp-up begins supported by strong licence signings and newly announced OBP deal (OBP implementation is in-house and usually has long-and-large implementation revenue streams).
Encouraged by strong business prospects, high FCF yields of 5%+ and attractive valuations 17x PER, we continue to maintain our positive view on the stock with a BUY rating and DCF based TP of ` 4220 (implies 22x on FY21E PER).
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