Date : 27/09/2018
Majesco (NSE) Rs. 484.50/-
Majeco (NYSE) US$ 7.53/-
Market Capitalisation Rs. 1350.53 Cr
Cloud based deals continue to be the key growth catalyst
Majesco Q1FY19 results beat was driven by a robust performance of its Cloud business. Total Cloud business revenue grew by 74 per cent yoy, accounting for nearly 36 per cent of the total revenue. The Cloud business is witnessing huge demand, given its flexible pricing model, low upfront investments, better speed-to-value proposition and growing number of partner eco-systems for its offerings. As of Q1FY19, it has 38 clients on Cloud v/s 32 in Q1FY18. Faster implementation is also acting as a key differentiation, as it has been taking its clients live in record time. One of its Tier I clients in P&C space went live in 90 days for its Greenfield launch. Other customers that concluded implementation in Q1FY19 were also within the prescribed time-lines of 6-19 weeks. Management commentary remains confident on outlook and visibility given the robust interest in the market, huge build-up in pipeline and large order backlog. Despite the decline in order bookings, the company is confident of witnessing growth in order wins in FY19. Majesco remains on track in terms of prospects in the IBM channel. The delay in new win in the IBM channel can largely be attributed to typical longer decisionmaking cycle in the Tier-1 space. Order book to be executed over next twelve month stood at US$83.4mn.
Cloud to propel annuity revenue stream and profitability (& Maintain BUY)
As of Q1FY19, the total recurring revenue stood at Rs0.7bn, up 49 per cent yoy. We believe that the robust traction in the Cloud business would drive overall recurring revenue and eventual profitability of the business. We expect revenue CAGR of nearly 16 per cent and OPM gains of nearly 750bps over FY18-20E and maintain BUY rating with DCF-based TP of Rs700.
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