Buy Oracle Financial Services Software; target of Rs 4000: Dolat Capital Market

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Dolat Capital Market's research report on Oracle Financial Services Software

OFSS reported inline results with a revenue growth of 3% YoY at Rs 11.9bn (below DE at Rs12.5bn). OPM for the quarter stood at 46% up 360bps YoY (down on QoQ basis), as cost efficiency gets further deep. EBIT and PAT were in line at Rs 5.5bn (DE Rs5.5) and Rs3.9bn (DE 3.9bn). OFSS signed new Licences worth US$13.4mn in line with our estimates ($12mn in Q2FY20) that included 13 new deals across including 4 in developed markets (refer Exhibit 6) and also witnessed 18 go-lives in Q2. Improved deal momentum led by Digital acceleration theme (Banks investing both on creating digital channels as well as towards innovative credit initiatives across globe), significant savings on cost due to remote operations (H1 EBIT margins up 338bps) 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 5%+) 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 Rs 4,000 (implies 17x on FY23E PER).

For all recommendations report, click here

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