The Hindu Business Line : i-flex Solutions: Book profits

SHAREHOLDERS may consider booking profits on part of their holdings in i-flex Solutions as the stock has run-up by over 50 per cent since the earnings announcement in end April. At Rs 920, the stock commands a rich price earnings multiple of 25 times FY06 earnings. We remain confident about the fundamentals of i-flex, in both its products and services business. But in our view, high growth expectations are already built into the price. Any earnings surprise in the first quarter results expected later this month might affect valuations, especially given the lumpy nature of the product-led business model of i-flex. In the products business, the company finds itself in a sweet spot where both revenues and additions to order book have increased in the fourth quarter ended March 31, 2005. The strong product wins from GE Capital, banking deals from Brazil and Austria, among others that have been announced in the April-June quarter are also encouraging. The services business has also come up with a thumping show and this momentum is set to continue. However, the greater competitive intensity in banking products from the likes of Temenos or Misys and better penetration in the developed markets remain key challenges facing i-flex.

Krishnan Thiagarajan

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