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Anand Rathi
Target: ₹700
CMP: ₹674
Intellect’s focus on capital allocation and profitability remains high with the company settling for a little lower growth aspiration (than in the past) but retaining a strong margin focus. It expects to keep cost structures and R&D investments steady, driving up higher EBITDA. EPS growth guidance is nearly 30 per cent for the next two years, as iGTB regains momentum and iGCB targets market share in UK/Germany.
The flagship iGTB is seeking to double revenue over 4-5 years (implied CAGR: 15 per cent) through a mix of cross-selling four modules per customer (from 2.7) and increasing clients to 150 (from 94). The second-largest (iGCB) is in the process of winning a few more deals in Europe, after the Otto one, and aspires at 60 per cent revenue in advanced markets by FY23. The other two (iRTM, iSEEC) are small but afford Intellect critical-markets access. On margins, Intellect will benefit from iGCB’s success in advanced markets and from more license sales on the product achieving maturity. Faster SaaS (11 per cent of revenue) adoption could be the only headwind.
Intellect believes that current costs (engineering and S&M) suffice to deliver on its growth aspirations.
We raise our FY22/FY23 EBITDA 3 per cent/6 per cent and our price target to ₹700 (from ₹550) at 26x FY23 adj. EPS (23x earlier).
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