BSE ID : 532875
NSE ID : ADSL
CMP: Rs.223.35
ADSL’s pan-India presence (at 132 locations), direct support model, established remote infrastructure and significant price competitiveness provides an edge against competition in the domestic IMS market
IMS to drive growth; revenue share to reach 51% by FY10
ADSL’s pan-India presence (at 132 locations), direct support model, established remote infrastructure and significant price competitiveness provides an edge against competition in the domestic IMS market. Its marquee clientele include large customers won from leading Indian offshore vendors. The En Pointe Global Services LLC (EPGS) acquisition would significantly increase international IMS revenues apart from driving domestic revenues through offshoring. Further, the SOC services are expected to register an exceptional growth driven by increasing compliance requirements globally. We expect company’s IMS revenues to register 50% growth in FY10 and comprise 51% of total revenues against 29% in Q1 FY09.
EPGS synergies already playing out
ADSL acquired 80.5% stake in US-based EPGS, an onsite IMS player, in July 2008 for an equity valuation of US$30mn. The rationale behind this acquisition apart from gaining a strong US presence and large client relationships was to scale-up EPGS revenues by up-selling valued added services and improving margins through remote transition of delivery. By end of Q2 FY09, ADSL had already transitioned seven contracts of EPGS offshore that comprised 15-20% of its revenues. The second acquisition of Digicomp in April 2008 enhances the middle management bandwidth.
Earnings to record 21% CAGR | valuations inexpensive
We expect revenues and net profit of ADSL to record a healthy CAGR of 23% and 21% respectively over FY09-11E. Given the strong fundamentals, current valuations of 6.1x FY11 P/E appear inexpensive.
Source : India Infoline
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