Buy Ramco Systems; target of Rs 250: Dolat Capital

Dolat Capital's research report on Ramco Systems

RMCS reported strong results with Revenue growth of 4.5% QoQ at $19.4mn as against our estimate of $16.5mn as deal signings normalizes in Q1 alongwith continued improvement on faster Go-lives. Company won new orders worth US$21.3mn in Q1FY21, taking the unexecuted order book to US$164mn (2x revenue). Order intake improved materially after a brief freeze in March’20 (signed $13mn in Q4); although sales continues to remain largely digital-led only. Profitability in Q1 significantly with EBIT margins (Ex-FX) at 14.9% as it saved materially on personnel cost (steep pay-cuts to top 90 employees) and significant savings on SG&A (especially on Travel and Marketing), We do not see this as sustainable and should normalize to 12% for the full year. Result commentary and performance both has been a positive surprise and has led to restoration of our growth/estimates largely back to pre-pandemic levels.

Outlook

Also, positive newsflow on execution in terms of faster deployment would help it pace up the revenue recognition; factoring the same we retain our Buy rating on the stock with a DCF-based TP of Rs250 (implies 15x/12.5x PER on FY22E/FY23E earnings).