- by Stocktry Expert
- 19th Mar 2021
After 1,400% Rally in Covid Year, This Stock is Still Overly Enthusiastic
What do analysts say
ICICI Securities said the company is currently undergoing a phase of monetisation of products and will witness monetisation of big data analytics and artificial intelligence in the second phase. This, coupled with cost control, sustainable capex and improving working capital should bode well for its financials, it said.
“However, the recent runup in stock price prompts us to downgrade the stock from ‘buy’ to ‘hold’ with a revised price target of Rs 640 based on 5 times FY23 price/sales and 21 times PE on FY23 EPS,” the brokerage said.
Sharekhan said Intellect Design’s investments on composable technology to create products and platforms provide differentiated customer experience, reduce costs and faster time to market to its customers.
It values the stock at 27 times FY22 and 20 times FY22 EPS.
"We continue to like the stock given the favourable industry tailwinds, its future-ready product portfolio and possibilities of improving financial metrics. Hence, we maintain a ‘buy’ rating on the stock with a revised target of Rs 660," it said.
This is not far away from a record high of Rs 647.55 the scrip hit on Wednesday.
Intellect Design Arena NSE 4.07 % notched up a staggering 1,371 percent return over its 52-week-low price hit on March 25, 2020 on the Dalal Street during the covid. That means, a staggering Rs 6.8 lakh investment made in the stock on March 25, 2020 would have become Rs 1 crore today!
However, the latest market depression has impacted its continuous rise.
Intellect split builds software for the entire banking domain including corporate banks, NBFCs, central banks, retail banks, wealth managers and insurance companies.
Intellect's Chairman and Managing Director Arun Jain said in a telephonic interview that his company is eyeing double-digit revenue growth and over 30 percent margin growth in FY22. He sounded optimistic about deal wins and is hoping to generate Rs 20-100 crore business from the newly-launched 'Magic Aadhaar' over the next 2-3 years.
Arun Jain also said that unlike IT services firms, technology companies, like his, have an inverse financial matrix, wherein one first invests and then reaps the benefits. Jain said his company invested Rs 1,700 crore on sales and marketing over the past five years and about Rs 1,200 crore on research & development.
“After investing Rs 2,900 crore, our projection in October 2019 was that we would be commanding an Ebit margin of 20 per cent in the June quarter. We delivered on that. Ours is a product business, where R&D is the most critical piece. We have cracked that. The adoption of our products has been encouraging, even German financial institutions and French clients using them now,” Jain said.
“The beauty of this product is that we had to spend only a few hundred thousand dollars, as it is based on the same platform that we had built in the US. Revenue from this product over the next three years could be Rs 20-100 crore, but the margin would be healthy,” Jain said.
According to FY21 performance, the company reported net profit of Rs 182.20 crore for the period ended December 31, compared with a Rs 25 crore loss reported for the year-ago period.
This is what various Analyst has to say:
1. ICICI Securities said the company is currently undergoing a phase of monetisation of products and will witness monetisation of big data analytics and artificial intelligence in the second phase. This, coupled with cost control, sustainable capex and improving working capital should bode well for its financials, it said.“However, the recent runup in stock price prompts us to downgrade the stock from ‘buy’ to ‘hold’ with a revised price target of Rs 640 based on 5 times FY23 price/sales and 21 times PE on FY23 EPS,” the brokerage said.
2. Sharekhan said Intellect Design’s investments on composable technology to create products and platforms provide differentiated customer experience, reduce costs and faster time to market to its customers."We continue to like the stock given the favourable industry tailwinds, its future-ready product portfolio and possibilities of improving financial metrics. Hence, we maintain a ‘buy’ rating on the stock with a revised target of Rs 660," it said.
This is not far away from a record high of Rs 647.55 the script hit on Wednesday.
