Multibagger Recommendation RS
Software (India)
Target price of Rs.600 TO 900 Recommended
date :12/08/14
Current Price: 449.70 Tgt
600 TO 900
Detailed report on RS Software
(India):
RS Software began its work in the
payment industry 20 years ago and continues to leverage its early mover's
advantage in this domain to strengthen its secular growth. Its payments
expertise has helped clients address the convergence of payment types, the
proliferation of mobile devices, the move to cloud computing and the
introduction of new strategies, such as behavioral targeting. No other custom
software provider delivers more industry-specific knowledge and experience to
organizations competing for market share in the payments space.
The company has registered robust
results for the quarter ending June 2014. The revenues from operations grew by
about 10% to Rs.98.62 cores vs. Rs.89.92 cr. in the like quarter previous year.
Operating profit climbed sharply by ~42% at Rs.22.94 cores as against Rs.16.17 cores
in the previous year quarter. The adjusted net profit stood at Rs.15.82 core
for the quarter as compared to Rs.10.19 core; registering a growth of ~55%. On
the margins front, operating margin climbed about 528bps at 23.26% as against
17.98% while net profit margin expanded 471bps at 16.04% from 11.33% y-o-y.
Revenues from USA grew sharply by
approx. 17% at Rs.91.07 cores from Rs.78 cores in the corresponding quarter
last year; contributing 92.34% to the total revenues for the quarter. Rest of
the World (ROW)revenues dipped by about 37% at Rs.7.55 cores; contributing by
just 7.66% to the total revenues.
Valuation
With robust business model, strong
fundamentals, debt-free status, wide market presence, esteemed clientele and
growing electronic payment industry; RS Software Ltd. growth prospects and
profitability looks optimistic. We believe the company is trading at an
attractive valuation at 8.38x and 6.97x of FY15EPS of Rs.51.33 and FY16EPS of
Rs.61.67. We initiate a 'BUY' on the stock with a target price of Rs.600 TO 900
with the medium to long term investment horizon.
