Top brokerage Suggests Buy This Multibagger Small Cap IT Stock For High Returns, Target Price Rs 524

Stock Outlook & Returns

The Current Market Price (CMP) of Intellect Design's stock on NSE is ₹465.60 apiece, trading 1.34% up from its previous close. Today, it opened at ₹462.45 per share. On NSE, its 52-week low is ₹407.45 recorded on November 4, 2022, and its 52-week high is ₹986.65 recorded on April 7, 2022, respectively.

The stock in terms of return on investment has given mixed returns over the past 1 year. In 1 week it grew 5.4% and in 1 month it grew 10.5%, respectively. However, in 3 months, it fell by 22.26% and in 1 year, it fell by 25.44%, respectively. In 3 years it gave a multibagger return of 213.48% and in 5 yeras, it gave 238.93% multibagger return.

Result Overview

Intellect Design Arena Ltd Q2FY23 consolidated revenues came in at ₹527.54 Cr, up 16.68% YoY and down 2.54% QoQ. EBITDA for Q2FY23 stood at ₹83.96 Cr, down 28.23% YoY and down 28.96% QoQ. EBITDA margins for Q2FY23 came at 15.92% as compared to 21.61% in Q1FY23 and 26.14% in Q2FY22. PAT for Q2FY23 stood at ₹48.45 Cr, down 41.3% YoY and down 33.8% QoQ

Management Commentary

Management mentioned that slowing of demand environment, longer decision making time by clients and shrinking of deal size had impacted their growth during Q2FY23. Management revised downward the revenue guidance to 15% for FY23 vs 20% growth earlier. Management remains confident on achieving 20%+ EBITDA margins for FY23.

Segmental Analysis

Q2FY23 Revenue Breakup: License (12%), AMC (17%), Implementation & Customization (48%), Cloud/SaaS (23%). H1FY23 Currency Wise Revenue Mix: USD (36%), GBP (20%), CAD (8%), INR (27%), EURO (3%), Others (6%).

Concall Summary

During the quarter company launched 2 AI-based Platforms - Magic Invoice and iESG. 14 new Customers have chosen Intellect's Digital stack for their Digital transformation, including 9 Customers who have chosen Intellect platforms in Q2 FY 23. Platform revenue of Q2 FY 23 is INR 119 Cr as against INR 90 Cr in Q2 FY22 - grew 33% YoY. License Revenue of Q2 FY23 is INR 68 Cr as against INR 86 Cr in Q2 FY22. AMC Revenue of Q2 FY23 is INR 90 Cr as against INR 81 Cr in Q2 FY22 - grew 10% YoY. The destiny deals increased by 2 during Q2FY23 taking it to 66. The average size of destiny deals declined to US$5.5 mn from US$6.2 mn in Q1FY23. Management mentioned that the funnel remains steady at US$818 Mn, +1.6% QoQ. Operating cash flow in H1FY23 is low mainly due to bonus payout, travelling expenses and increase in employee expenses. During Q2FY23, the company recorded 10 Digital led wins including 9 Platform deal wins.

Valuation & Outlook

Hem Securities said, "We believe company will continue to perform well over next few quarters due to robust demand environment. Company is continuously launching AI based products in the Financial sector due to strong demand. Also the confident commentary from management aim to achieve 20%+ EBITDA margins are other positive triggers for 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 20.6x FY24E earnings to arrive at the target of ₹524."

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 making any investment decision.