Dolat Capital's research report on Oracle Financial Services Software
OFSS reported strong results beating on all counts with a revenue growth of 5% YoY at Rs 13.4bn (DE at Rs11.5bn). OPM for the quarter stood at 49.6% up 316bps YoY (up 700bps QoQ) significant beat to our estimate of 39.5%. PAT was up 27% YoY on higher other income (up 49% YoY) and reduced ETR of 32% (this is normalised rate now). Despite the travel restrictions and typical in-person behaviour in many markets; OFSS signed new Licences worth US$29.5mn (highest over last 14 quarter) that included 15 new deals including 8 in developed markets (refer Exhibit 6) and also witnessed 22 go-lives during the quarter. Improved deal momentum led by Digital acceleration theme (Banks investing both on creating digital channels as well as towards innovative credit initiatives across globe post COVID), significant savings on cost due to remote operations (cumulatively saved about Rs490mn in Travel and Other expenses) could extend the overall earnings momentum significantly hereon. Global leadership in underpenetrated CBS business, unmatched access, superior technology, integrated & reliable offering would ensure that OFSS emerge as most preferred vendor in the segment. Superior pricing and brand appeal would mean stronger profitability, improved cash generation (FCF Yield 6%+) and generous pay-outs.
Outlook
We continue to maintain OFSS as our preferred pick with Buy rating on the stock with DCF based TP of Rs4000 (implies 19x on FY22E PER).
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