Edelweiss bullish on Rolta and Infotech Enterprises
Thursday, August 30, 2007
Edelweiss Equity Research is Bullish on the prospects of Rolta India and Infotech Enterprises both Midcap software companies.Rolta India Ltd:
All-time high order book and pipeline bids. Order book stands at INR 8.4 bn. All business segments witnessing strong traction. A pleasing guidance issued for the first time in the company's corporate history guiding towards a 33-35% growth in revenues and 33-36% growth in net profits for FY08 over FY07 (both in INR terms).
Rolta, revenues and net profits to grow at a CAGR of 38.6% and 40.2% over FY07-09E, respectively. At a CMP of INR 470, the stock currently trades at a P/E of 15.6x and 11.2x on our FY08E EPS of INR 30.7 and FY09E EPS of INR 41.9, respectively. The stock has progressively moved to a higher P-E band in the last one year from the 10x-12x range to the 14x-16x. Investors can look at meaningful returns of ~ 35%-40% over the next one year.
Infotech Enterprises India Ltd:
Both engineering and GIS segments are on track to achieve the growth (engineering which accounts for 60% of revenues will likely grow in excess of 40% in FY08 in USD terms. The company has also strengthened its hedge position providing it insulation from forex fluctuation. Therefore, we do not expect to see forex losses in Q2FY08 as in Q1FY08. This factor alone is likely to significantly drive up profits q-o-q. Exposure to the US is relatively low at 47%. Europe is as significant as the US. Recently, the company has raised money to the tune of INR 3.0 bn (USD 75 mn, 20% of market cap), which it plans to utilise for acquisitions.
Infotech's revenues and net profits are expected to grow at a CAGR of 29.7% and 29.4%, respectively. The stock has corrected more than 25% post the Q1 results, which is overdone. At a CMP of INR 270, the stock trades at a P/E of 15x and 10.6x our FY08E and FY09E earnings - Rs 18 and Rs 25.3, respectively. The stock can return at least 30% returns to the investor within 12 months.
Update:
Kotak Securities just a while ago upgraded Infotech Enterprises from Hold to BUY with a price target of Rs 388.
Labels: Infotech-Enterprises, Rolta
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