Buy Intellect Design Arena; target of Rs 275: HDFC Securities

HDFC Securities' research report on Intellect Design Arena

Intellect� Design Arena (INDA) posted robust 4QFY18 both on the revenue and margin� front.� Revenue� stood� at� USD 47.7mn (higher than our est. of USD 43.6mn),� up� 14.1%� QoQ and 27.6% YoY. Growth was driven by higher license component� (+42.3%� YoY).� The� company� has� a� strong order backlog of Rs 10.40bn� (excluding� GeM� project)� which� is ~79% of FY19E revenue. EBITDA margin� expanded� 207bps QoQ to 8.0% (in-line with our est. of 8.0%). There is� non-linearity� in� the� business and margins will expand with growth in licence revenue (led by new deal wins).

Outlook

We expect quarterly swings in revenue (1QFY19E will� be soft), top-line growth will be fuelled by new deal wins, and margins will increase with operating leverage. The stock is up 44% in the last six months, and we expect this momentum to continue.

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