Add Intellect Design Arena, target price Rs 493: Centrum Broking

Centrum Broking has add call on Intellect Design Arena with a target price of Rs 493. The current market price of Intellect Design Arena is Rs 443.4.

Intellect Design Arena, incorporated in the year 2011, is a Small Cap company (having a market cap of Rs 6012.15 Crore) operating in IT Software sector.

Intellect Design Arena Ltd. key Products/Revenue Segments include Computer Software, Interest and Dividend for the year ending 31-Mar-2022.

Financials
For the quarter ended 31-12-2022, the company has reported a Consolidated Total Income of Rs 567.09 Crore, up 5.32 % from last quarter Total Income of Rs 538.43 Crore and up 9.25 % from last year same quarter Total Income of Rs 519.09 Crore. Company has reported net profit after tax of Rs 63.10 Crore in latest quarter.

The company’s top management includes Mr.Arun Jain, Mr.Anil Kumar Verma, Mr.Andrew England, Mr.Arun Shekhar Aran, Mr.Abhay Gupte, Ms.Vijaya Sampath, Mr.Ambrish Pandey Jain. Company has S R Batliboi & Associates LLP as its auditors. As on 31-12-2022, the company has a total of 14 Crore shares outstanding.

Investment Rationale

Intellect Design Arena reported revenues of Rs 5,469 mn (+4% q-o-q, +8% y-o-y), lower than the brokerage's consensus estimates. Intellect attributed lower than expected revenues to slowdown in European license deals, driven by macroeconomic factors. Overall pipeline continued to grow at Rs 70,306mn (+5% q-o-q, +45% y-o-y).while the company had 6 deal wins over Q3FY23.

EBITDA was Rs 1,050 mn (+25% q-o-q, -21% y-o-y), which was above Centrum's estimates with an

EBITDA margin of 19.2% (Q2FY23: 15.9%). R&E expenses were Rs 435 mn (8.0% revenues, +40.2% y-o-y). Intellect management pointed out increasing traction for products in US/Europe, especially for its core banking products in Europe and Magic Submission product in US.

The brokerage revises its revenue forecasts for FY23/24E by -3%/-5% and EBITDA margins by +50/-90 bps due to lower growth in licenses/SaaS business.

Promoter/FII Holdings
Promoters held 30.64 per cent stake in the company as of 31-Dec-2022, while FIIs owned 22.2 per cent, DIIs 4.39 per cent.