Buy This IT Stock For 16% Gains, Given Over 450% Returns In 5 Years, Reported 25% Revenue Growth

A leading brokerage firm, Hem Securities, in its recently published report, suggested buying the stock of the Intellect Design Arena Ltd. The brokerage sees potential gains of 16% in near future. Furthermore, the management has also mentioned that they are targeting to reach a $75 Mn quarterly run rate in the next 2-3 quarters and a $100 Mn run rate in 2 years from now. However, Management did not give any specific guidance for FY23 but mentioned that they are targeting to achieve an EBITDA margin of 30% in the coming years.

Stock Overview

Today, the Intellect Design Arena Ltd stock was opened at Rs 661.65, while the Current Market Price (CMP) of the stock is Rs 664.60. According to Hem Securities' estimated Target Price, it has the potential to gain 16%.

It had touched the 52 week low of Rs 562.65 on 22 May 2022, while it had hit the 52 weeks high of Rs 986.65 on 7 April 2022. Both the low and high it touched comes this year in previous 2 months.

The stock has given negative returns, in 1 year as well as in the last 1 month, however, it has given whooping 458.7% returns in the last 5 years. The stock's P/E ratio is 25.75, whereas the sector P/E ratio is 29.68.

Result Overview

Intellect Design Arena Ltd Q4FY22 consolidated revenues came in at ₹509.4 Cr, up 28.1% YoY and up 0.2% QoQ. EBITDA for Q4FY22 stood at ₹120.6 Cr, up 20.6% YoY and down 9.3% QoQ. EBITDA margins for Q4FY22 came at 23.6% as compared to 26.2% in Q3FY22 and 25.1% in Q4FY21. PAT for Q4FY22 stood at ₹95.3 Cr, up 16.0% YoY and down 5.8% QoQ.

The company reported 25% revenue growth in FY22 vs guidance of 20%. The company lost 2 deals because of geopolitical tensions which leads to a loss of ~$ 4-5 Mn revenue. EBITDA in the quarter decline due to an increase in employee expenses. Deal Funnel for the company is at US$725 Mn, up by 27% YoY. The company launched one more platform in Q4FY22, making it a total of 12 products and 5 platforms. Number of destiny deals is at 61, which was at 43 in the same quarter last year. The company had 6 Go Lives in Q4FY22 as compared to 11 in Q3FY22 majorly due to the third wave of COVID. The company is positive on SaaS and expects their License Linked revenue to be at 60-65% in the medium term which is currently at ~57%. The company had added ~400 new addition in Q4FY22 and is not planning to hire aggressively in the near term.

Hem Securities Suggests Buy For Target Price of Rs 768/share

The brokerage said, "We believe the company will continue to perform well over the next few quarters due to robust demand environment. The company is continuously launching AI-based products in the Financial sector due to strong demand. Also, the confident commentary from management aim to achieve 30% Operating margins are other positive triggers for the stock. IT Sector companies are facing supply based challenges across the globe and may remain volatile in near term but we believe long term growth drivers of this sector remains intact. We give a "BUY" rating on the stock and value the stock at 21.5x FY24E earnings to arrive at the target of Rs 768."

 

About - Intellect Design Arena Ltd

Incorporated in 2011, Intellect Design Arena is a global leader in Financial Technology for Banking, Insurance and other Financial Services. A uniquely focused Products business, Intellect addresses the needs of financial institutions in varying stages of technology adoption.

Intellect Design Arena Limited works globally in the fields of Financial Technology for Banking, Insurance and other Financial Services. Intellect embodies rich Intellectual Property and robust platforms & products across Global Consumer Banking (iGCB), Central Banking, Risk & Treasury Management (iRTM), Global Transaction Banking (iGTB) and Insurance (Intellect SEEC).

The Intellect suite is the industry's largest, with over a decade of continuous and considerable research and development expenditure. The company has a comprehensive portfolio of products across Global Consumer Banking, Central Banking, Risk & Treasury Management, Global Transaction Banking and Insurance and is also engaged in the business of software development.

 

Disclaimer

The stock has been picked from the brokerage report of Hem Securities. Greynium Information Technologies, the Author, and the respective Brokerage House are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before taking any investment decision.