Dolat Capital Market's research report on Nucleus Software Exports
Nucleus revenues stood at Rs 1.37bn up 7% QoQ ahead of our estimates of 4.5% QoQ growth. Performance was led by sustained demand traction across markets (primarily in India) and is evident from sequential growth in Product Segment Order book by 9.5% QoQ at Rs 4.4bn, (up 6% on YoY basis). EBIT margin declined 430bps QoQ at 22% (DE 25.2%) as company made provision towards potential special bonus payout to employees in H2 amounting Rs150mn, which may get pay-out in Q3 or Q4 and may also add up to this kitty based on market situation. Nevertheless, apportioning this over full year, adj. OPM actually went up by 400bps. Management commentary improved further as they added 4 new clients and 10 product orders in the quarter, driving overall order book by 7% on QoQ basis. However, management also warned against potential decision making freeze in case concerns from COVID worsens.
Outlook
We are enthused by sustained demand momentum, strong order addition and tighter cost management which has helped in further uptick in our earnings estimates by 4%/13% for FY21/22E and maintain Buy rating on the stock with TP of Rs725 (implies 13x on FY23E earnings).
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