August 18, 2016 / 14:01 IST
Religare's research report on Oracle Financial Services
OFSS’s Q1 revenues grew 12.3% YoY to Rs 11.8bn, beating RCMLe of Rs 11.1bn led by product revenue growth which was aided by continued traction in new licenses however implementation revenues were tepid. We believe the implementation revenues will lag with increasing popularity of saas and implementation light licenses. We cut estimates to reflect slower implementation growth and lower margins and see limited upside to our Mar’17 TP of Rs 4,000 (unchanged) set at 20x one-year fwd. P/E. Downgrade to HOLD (from BUY).
Overall, Q1FY17 was a good quarter for OFSS with continued momentum in new license sales. We however pare our FY17/FY18 earnings estimates by 0.4%/2.1% to factor in lower margins and slower implementation. While OFSS is executing well and its ROCE profile remains solid, we think valuations at 19x 2018E P/E are not cheap and the stock offers limited upside from current levels. Downgrade to HOLD (from BUY) with an unchanged Mar’17 TP of Rs 4,000.
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