Recommendation: Buy (again!! J)
CMP = Rs 107 (at the time of this recommendation)
Price target: Rs 180
Key points:
- 3i Infotech's top line grew by 33.9% qoq to a whopping Rs 468.5 crore in Q1FY2009. While, the acquisitions contributed 19.9% to the sequential growth, the organic growth contributed 14.1% to the same. The operating profit margin declined by 299 basis points to 21.8% during the quarter on account of unfavorable sales mix (higher revenues contribution from the low-margin business). Consequently, the company's operating profit grew by 17.7% qoq to Rs 102 crore during the quarter.
- The net income grew by 20.1% qoq to Rs 58.7 crore. In terms of operational highlights, the company's order book grew by 6.1% qoq to Rs 917.8 crore driven by healthy sequential growth of 9.7% in the product order book. The revenues from the top five clients and top 10 clients (excluding ICICI group) grew by 148.7% and 78.5% respectively on a sequential basis.
- I have revised the FY2009 earning estimates upwards by 1.8% because of higher-than-expected contribution from the acquisitions.
- At the current market price, the stock is trading at attractive valuation of 7.3x FY2009 earning estimates and 6.0x FY2010 earning estimates.
- I maintain Buy recommendation with price target of Rs 180 over next 3-4 months.
