Summary
of Contents
STOCK UPDATE
3i Infotech Cluster: Emerging
Star Recommendation: Buy Price target: Rs400 Current
market price: Rs300
Price target
revised to Rs400
Result
highlights
-
3i Infotech
has reported a growth of 22.5% quarter on quarter (qoq) and 75.2%
year on year (yoy) in its consolidated revenues to Rs210.2 crore
for the fourth quarter. The service business grew by 28.3%
sequentially to Rs102.6 crore whereas the product business grew by
17.4% qoq to Rs107.6 crore.
-
The operating
profit margin (OPM) continued to firm up. The OPM improved by 20
basis points to 25% (the highest ever reported in any quarter) on
the back of a sharp improvement in the margins of the service
business.
-
The benefits
from the lower software product development charges were nullified
by the higher depreciation and lower other income. However, an
increase in the tax rate resulted in a relatively lower growth
rate in the earnings of 16.7% qoq and 83.7% yoy to Rs32.2 crore,
in line with our expectations of Rs32.3 crore.
-
On a full year
basis, the consolidated revenues and earnings have grown by 56.8%
and 80.6% respectively. The OPM has shown an improvement of 370
basis points to 24.2% during the year.
-
In terms of
operational highlights, the company continues to show a healthy
growth in the pending order book that has grown by 33% qoq to
Rs568.7 crore. This is more than double of Rs266 crore as in March
2006.
-
The growth
guidance for FY2008 is also healthy. Revenues are guided in the
range of Rs1,000-1,100 crore (a growth of 49-64% over the total
turnover of Rs670.8 crore). The earnings per share (EPS) are
guided in the range of Rs20.1-21.5 per share (on a fully diluted
equity base as on March 2007).
-
Along with the
results, the company has rewarded the shareholders with a bonus
issue of 1:1 and a dividend of 20% (or Rs2 per share).
-
To factor in
the healthy order backlog and robust growth guidance, we have
revised our FY2008 earnings estimate by 3.9% and introduced our
FY2009 estimate in the note. At the current market price the stock
trades at 14.1x FY2008 and 11.2x FY2009 estimated earnings (based
on fully diluted equity including the Euro 30-million foreign
currency convertible bond [FCCB] issue closed in April 2007 and
earnings are adjusted for dividend on the preference shares). We
maintain our Buy call on the stock with a revised price target of
Rs400.
VIEWPOINT
Infrastructure Development and Finance
Company
Plans to raise
equity capital Infrastructure Development and Finance Company
(IDFC) was established in 1997 sponsored by the Government of India,
Reserve Bank of India (RBI) and Infrastructure Development Bank of
India as a private sector enterprise with the sole objective of
promoting infrastructure financing. The company's future plans are
based on the four-by-four strategy. It would pursue four objectives
(profitability, balance sheet expansion, innovation and thought
leadership) focus on four sectors (transport, energy, telecom and
industrial/commercial infrastructure), its portfolio would comprise
four products (treasury/structured products, equity/asset
management, project finance and advisory) and it would also like to
explore four frontiers (urban services, rural infrastructure, health
and
education). |