Glodyne Technoserve

AMONG the few companies which have maintained its growth momentum in the ongoing economic slowdown is Glodyne Technoserve. It has a presence in infrastructure management services (IMS) and domestic e-governance projects. The company is expected to benefit significantly from the rural development initiatives of the central government. Medium-term Investors can add this stock to their portfolio.
Business:

Glodyne currently derives around three-fourths of its revenue from IMS and the rest from software services, mainly projects related to egovernance. Both these business segments have remained relatively insulated from the slowdown. Infrastructure management is an operational expense for its customers and is non-discretionary in nature. Rather, it lowers the operating expenses of its clients significantly. The company is trying to manage an increasing amount of IMS activities from remote locations, thereby improving the operating margin. In e-governance, the company is focussed on the domestic market. It has bagged a contract (called e-Shakti project) from the government of Bihar which will help monitor National Rural Employment Guarantee Scheme projects in that state. The contract initially, estimated at around Rs 285 crore, is expected to go up to Rs 500 crore due to the increased scope of the contract.

Financials:

The company’s net sales have been growing at a compounded annual rate of around 80% for past four years. It managed to report around 70% growth in net sales for the financial year ended March 2009. More off-shoring of its IMS business has improved the overall operating margin by around 300 basis points to 21%. As a result, the net profit for the FY ’09, continuing the previous trend, almost doubled to Rs 78 crore. The company’s net debt has more than doubled to Rs 85 crore. But its interest coverage ratio is still at a comfortable level of more than 13.

Growth driver:

The new government at centre is bullish on rural development and plans to spend more on different rural development schemes. It has increased allocation to NREGS and other such schemes in its recent budget. The company, being a first mover, is going to benefit from this. It is already working with many state governments on some pilot projects and if everything goes smoothly it is likely to bag big-ticket orders from them. Its recent acquisition of Broadllyne Technologies shows its continuous focus on the domestic market. The acquisition is an all-stock deal and would not affect the company’s cash flow. The company is also looking at small overseas companies mainly to increase its client base.

Valuation:

Though the company has maintained more than 80% growth in topline, we believe that it may not be able to continue this in the coming years. The company’s topline is expected to grow at 40% next year and its operating margin will be maintained. The new acquisition is also expected to add around Rs 8-10 crore to the bottomline. The company’s diluted earning per share (EPS), after adjusting for issue of a total 15 lakh of equity shares and convertible debentures, is calculated as Rs 90 for FY ’10. At the current price level, the forward price-earning (P/E) multiple works to be around 5. The stock has traditionally traded at a P/E band of 7-12. Hence we believe that there is a strong upside potential in the next 1-2 years. Investors with a medium term horizon can consider buying this stock.

Beta 0.9
Institutional holding 0.02%
Dividend Yield 0.25%
P/E 7.1
M-Cap Rs 520 cr

Stock Views on Glodyne Technoserve, Bank of Maharashtra, Jubilant Organosys

Reliance Money on Glodyne Techno - Target Rs 575

Reliance Money has maintained its buy rating on Glodyne Technoserve, with price target of Rs 575, in its report.

"We view this acquisition as a positive development for Glodyne Technoserve, however we are still awaiting for the finer details of the deals and integration process. We maintain our earlier estimates for FY10E and FY11E for the company and will rework on our estimates after our meeting with the Glodyne’s management. At the current market price Rs 466, Glodyne is trading 5x FY10E and 4x FY11E. We maintain 'BUY', with a target price Rs 575," says Reliance Money's report.

Sushil Finance on Bank of Maharashtra - Target Rs 46

Sushil Finance has recommended a buy rating on Bank of Maharashtra, with price target of Rs 46, in its report.

"Bank of Maharashtra (BOM) has high CASA share of 35.7% will help the bank in maintaining its low funding cost (5.9% in FY09). Strong business growth, high CASA ( 36%), decent asset quality, sustainable ROE of about 16%, strong network base, comfortable CAR of 12% with finance ministry promising to infuse the required capital in BOM, scope for growing advances due to low Credit deposit ratio and decent dividend yield of +5% are the other key positives for the bank. Stock is trading at a valuation of 0.7x FY11E ABV and 3.3x FY11E Earnings. Buy with price target of Rs 46," says Sushil Finance's report.

Reliance Money on Jubilant Organosys - Target Rs 203

Reliance Money has maintained its buy rating on Jubilant Organosys with a revised target price of Rs 203 in ite report.

"Jubilant Organosys reported a muted growth of 8% in its consolidated revenues to Rs 9013 million in Q1FY10, as the Industrial and Performance Products (IPP –that contributes about 30% of total revenue) Revenues saw 8% decline on account of lower realization and product rationalization. Despite global slowdown and inventory issues, Jubilant has been delivering steady growth in its CRAMS operation and we expect similar trend going ahead. Further increasing R&D pacts provide us long term visibility for the company. Also, the margin expansion seems to be continuous process for Jubilant. Looking at the steady revenue growth with better profitability and reducing balance sheet risk for Jubilant, we maintain our 'BUY' rating with the revised target price of Rs 203 (7x FY11EPS), " says Reliance Money's report.

Stock views on Orchid Chemicals, Glodyne Technoserve, Unitech

Sharekhan on Orchid Chemicals, target of Rs 163

"The approval and launch of Tazo-Pip in the USA and the resumption of supplies to Europe would act as major triggers for the stock in the near term, whereas the reduction in the debt levels and interest costs would drive the stock in the medium to long term. At the current market price of Rs 94, Orchid is discounting its FY2011E earnings by 5.8x. We maintain our Buy recommendation on the stock with a price target of Rs 163," says Sharekhan's report.

Reliance Money on Glodyne Techno, target of Rs 575

Glodyne Technoserve continues to leap forward with impressive financial performance, we estimate an EPS CAGR of 33% over FY09-11E. At CMP of Rs 488, stock trades at 5X FY10E earning and 4x FY11E. We continue to remain positive on long term sustainability of Glodyne’s business model and recommend 'BUY' with a 12-month target price of Rs 575. At our target pricestock will be valued at 5x FY11E," says Reliance Money's report.

KRChoksey on Unitech, target of Rs 110

"The successful QIP’s has brought positive triggers in the stock. We expect Unitech would be able to launch 35 million sq ft in next 2 years. The company plans to launch 40 projects at aggressive price points on which they have received a good response. We expect Unitech to reduce its debt by 35% to Rs 5,070 crore by the end of FY10 from the existing debt of Rs 7,800 crore., which will bring down its D/E from 1.6X to 0.5x. Based on our funding analysis, we believe that the funds raised from QIPs and other initiatives (asset sale, Telenor deal, warrants to be issued to promoters, etc) would be sufficient to fund its planned projects. We thus belive that the funding woes for the company are more or less over in short to mid term. At CMP of Rs.84 we maintain our ‘BUY’ recommendation on the stock with a target price of Rs 110, which gives it an upside potential of 29.4%. At the CMP of Rs 84, the stock is trading at 20.3x FY10E earnings of Rs 4.2," says KRChoksey's report.

Stock Views on Glodyne Technoserve, HCL Technologies, ITC

Reliance Money on Glodyne Technoserve - Target Rs 815

Reliance Money has maintained its buy rating on Glodyne Technoserve with a target of Rs 815 in its September 22, 2008 research report. "At the current market price Rs 683, Glodyne is trading 11x FY09E and 6x FY10E. We maintain BUY, with a revised 12 months target price Rs 815; we had earlier given a target price of Rs 784. On our revised target price stock will be valued at 13x FY09E and 8x FY10E," says Reliance Money's research report.

Reliance Money HCL Technologies - Target Rs 248

Reliance Money has recommended a hold rating on HCL Technologies with a target of Rs 248 in its September 22, 2008 research report. "Industry headwinds have taken its toll on the stock performance of HCL Technologies and it has corrected by almost 25% in the last 5 months. We expect HCL Technologies revenue and net profit to grow at a CAGR of 24% and 32% over FY08E-10E. HCL technologies stock trades at a P/E of 10x FY09E and 9x FY10E earning. We continue to recommend a HOLD on HCL Technologies with a reduced target price of Rs 248, at our target price the stock will be valued at 11x for FY09E and 9x FY10E earning," says Reliance Money's research report.

India Infoline on ITC - Target price Rs 214

India Infoline has recommended a buy rating on ITC with a target price of Rs 214 in its September 22, 2008 research report. "In the coming quarters, we believe the higher cigarette prices would get successfully absorbed by the industry and ITC's cigarette volume decline would significantly reduce. Outlook for the non-cigarette businesses such as hotels and paper remains positive with continued demand buoyancy while the FMCG - others segment is expected to turn profitable by FY10. With the entry into the personal care category, we expect ITC to become a tough competitor for Hindustan Unilever and Godrej Consumer Products. Also, strong cash flows from cigarette business can be invested in advertising heavily to build the personal care portfolio in the initial stage. We recommend a buy with a target of Rs 214," says India Infoline's research report.