Quickheal Technologies is the no 1 anti virus software provider in India, with a market share of nearly 30 per cent in the retail segment. The company came out with a pubic issue at Rs 321, at the start of 2016 and is currently trading at Rs 225, thus destroying one third of investor wealth.
Make no mistake, this is a leading anti virus software player in the country, which is now spending a lot of money in marketing, to further grow its market share.
Should you buy this stock, which is available 30 per cent lower than its IPO price?
A little about Quickheal
Quickheal is the No 1 retail player in the antivirus market with active licenses of 7.6 million as on June, 2016, spanning more than 80 countries.
The company has a product for every segment, including, Home, SMB, Enterprise, and across all platforms, including the likes of Windows, Mac, Android, iOS, Linux. Also, it has products across all devices including laptops, desktops, tablets and mobiles.
Clearly, it has extremely wide reach.
The key drivers for Quickheal
India has the second largest internet users in the world.
Consider this, in 2014, there were 1.15 billion malware reports, which rose to 1.46 billion by 2015. Growth in malware is now reaching alarming proportions.
On the other hand Android malware rose from 0.26 million in 2012 to 5.44 million by 2015. The above statistics is certainly not good for desktop and android users.
While it exposes individuals to a great deal of virus threats, it creates a solid and growing market for an anti virus player like Quickheal.
Solid marketing network
Quickheal has a strong marketing network, with sixty four offices and Warehouses in 36 Cities in India and four International Offices, 18,041 Retail Channel Partners, 438 Enterprise Channel Partners, 139 Government Partners and 1,189 Mobile Channel Partners.
This will remain a solid entry barrier for new entrants. Though it competes with many other companies, its solid network will help overcome competition.
The competition for the company comes from the likes of AVG, MacFee, Kaspersky etc.
However, the company remains the number one player, in the anti virus software market. It has launched an aggressive marketing campaign from the money it received from its IPO. You can now see regular advertisements on the television of Quickheal.
The company plans a special Special focus on Tier II and Tier III towns. The company's strategy also involves to focus on manufacturing, BFSI, healthcare, hospitality industries.
The company is a cash rich company. Cash in bank and in deposits is over Rs 24 crores. The company is a zero debt company, which means it has no debt on its books.
Operating Cash Flow/EBITDA of 74.8 per cent in FY16 is certainly very healthy.
We believe that the company can report an EPS of Rs 15 for FY 2016-17, which should take the p/e to around the 15 times, the current market price of Rs 225.
Sentiments for IT stocks have taken a beating, though Quickheal cannot be considered an IT play.
You are getting the stock at a discount of 30 per cent to its IPO price of Rs 321. Thus it makes sense to buy into the stock, as the 1-year forward p/e of 15 times is not bad. .
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