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CMP 747.00
Target Price 815.00
ISIN: INE793A01012
MARCH 19th
, 2014
ACCELYA KALE SOLUTIONS LIMITED Result Update: Q2 FY14
BUYBUYBUYBUY
Index Details
Stock Data
Sector IT
BSE Code 532268
Face Value 10.00
52wk. High / Low (Rs.) 805.00/320.65
Volume (2wk. Avg) 19000
Market Cap ( Rs. in mn) 11150.47
Annual Estimated Results (A*: Actual / E*: Estimated)
Years FY13A FY14E FY15E
Net Sales 3038.37 3281.44 3609.58
EBITDA 1351.60 1433.30 1574.43
Net Profit 843.76 883.09 975.76
EPS 56.53 59.16 65.37
P/E 13.22 12.63 11.43
Shareholding Pattern (%)
1 Year Comparative Graph
ACCLEYA KALE SOLUTIONS LTD BSE SENSEX
SYNOPSIS
Accelya Kale Solutions Ltd is an Accelya group
company & a leading solutions provider to the
Airline and Travel industry.
Consolidated operating income of Rs. 733.11 mn for
the second quarter ended December 2013
compared to Rs. 737.90 mn in December 2012.
Consolidated PAT stood at Rs. 203.03 mn compared
to Rs. 209.48 mn in the corresponding period.
Profit before interest, depreciation and tax is Rs.
336.49 mn as against Rs. 342.13 mn in Q2 FY13.
Accelya Kale Solutions has declared an interim
dividend of Rs. 27/- per equity share.
Hawaiian Airlines has chosen Accelya Kale’s
passenger revenue accounting solution, REVERA
PRA, to re-engineer their passenger revenue
accounting process.
Accelya has launched a comprehensive package of
Accelya All-In-One Offer to take care of airlines’
critical financial process.
Accelya has launched REVERA® NEXT. REVERA
NEXT is built to take airline Revenue Accounting
function to the NEXT level.
Accelya has won the IT Company of the Year 2014
at the Air Transport News Awards ceremony in
Istanbul.
Net Sales and PAT of the company are expected to
grow at a CAGR of 16% and 34% over 2012 to
2015E respectively.
PEER GROUPS CMP MARKET CAP EPS P/E (X) P/BV(X) DIVIDEND
Company Name (Rs.) Rs. in mn. (Rs.) Ratio Ratio (%)
Accleya Kale Solutions Ltd 747.00 11150.47 56.53 13.22 10.94 700.00
Accel Frontline Ltd 43.85 1305.10 0.54 81.20 1.29 0.00
Financial Tech Ltd 375.25 17307.10 50.03 7.51 0.65 400.00
Cigniti Technologies Ltd 309.45 6441.20 3.42 90.48 12.11 0.00
Recommendation & Analysis - ‘BUY’
Accelya Kale Solutions Ltd, an Accelya group company and leading provider of financial and business intelligence
solutions to the Airline and Travel industry, has recorded consolidated operating income of Rs. 733.11 mn for the
second quarter ended December 2013 compared to Rs. 737.90 mn in December 2012. Consolidated PAT stood at
Rs. 203.03 mn compared to Rs. 209.48 mn in the corresponding period. Profit before interest, depreciation and
tax is Rs. 336.49 mn as against Rs. 342.13 mn in Q2 FY13. For the quarter ended September 2013, the
consolidated operating income and PAT was Rs. 792.77 mn and Rs. 165.62 mn respectively.
The Board has declared an interim dividend of Rs. 27 per equity share. Hawaiian Airlines, the largest carrier in
Hawaii, USA, has chosen Accelya Kale’s passenger revenue accounting solution, REVERA PRA, to re-engineer
their passenger revenue accounting process. The Company will manage critical financial processes for Bangkok
Airways, Asia’s boutique airline. Accelya Kale offers unique solution to small and mid-sized airlines in financial
processing. Accelya is a debt free company. Over 2012-2015E, we expect the company to post a CAGR of 16% and
34% in its top-line and bottom-line respectively. Hence, we recommend ‘BUY’ for ‘Accelya Kale Solutions Ltd’
with a target price of Rs. 815.00 for medium to long term investment.
Financial Highlights CONSOLIDATED
Results updates- Q2 FY14,
Months Dec-13 Dec-12 % Change
Net Sales 736.98 743.08 (0.82)
PAT 203.03 209.48 (3.08)
EPS 13.60 14.03 (3.08)
EBITDA 336.49 342.13 (1.65)
The company’s net profit declines to Rs. 203.03 million against Rs. 209.48 million in the corresponding quarter
ending of previous year, a decrease of 3.08%. Revenue for the quarter slightly decreased by 0.82% to Rs. 736.98
million from Rs. 743.08 million, when compared with the prior year period. Reported earnings per share of the
company stood at Rs. 13.60 a share during the quarter, registering 3.08% decrease over previous year period.
Profit before interest, depreciation and tax is Rs. 336.49 millions as against Rs. 342.13 millions in the
corresponding period of the previous year.
Expenditure:
Break up of Expenditure
Rs. Millions
Q2 FY14 Q2 FY13
Employee Benefit Expenses 298.39 271.29
Depreciation and Amortization Expense
30.03 29.87
Other Expenditure 156.80 146.43
Latest Updates
• Accelya Kale Solutions Ltd has declared an interim dividend of Rs. 27/- per equity share.
• Accelya has announced that it will manage critical financial processes for Bangkok Airways, Asia’s boutique
airline. The scope of services includes the complete Book-to-Cash cycle including passenger revenue
accounting, cargo revenue accounting, sales audit, card billing and miscellaneous billing.
• Accelya Kale Solutions Ltd has launched REVERA® NEXT. REVERA NEXT is built to take airline Revenue
Accounting function to the NEXT level.
• Accelya Kale Solutions has launched a comprehensive package to take care of airlines’ critical financial
process. Accelya All-in-One Offer is specially designed to overcome the challenges of small and mid-sized
airlines in managing their financial function.
• Hawaiian Airlines, the largest carrier in Hawaii, USA, has chosen Accelya Kale’s passenger revenue
accounting solution, REVERA PRA, to re-engineer their passenger revenue accounting process. The solution
has been provided on a hosted basis.
• Accelya has won the IT Company of the Year 2014 at the Air Transport News Awards ceremony hosted in
Istanbul.
Company Profile
Accelya Kale Solutions Limited is part of the Accelya Group, a leading solutions provider to the Airline and Travel
industry. Formerly known as Kale Consultants Limited, the company became part of the Accelya Group in 2011.
Accelya Kale provides comprehensive financial and business intelligence solutions to the airline industry. Accelya
Kale’s solutions are available as hosted and outsourced in pay-per-use models. It also helps them gain insights on
business performance using decision support tools and data analytics.
The company spans across Revenue Accounting, Audit & Revenue Recovery, Credit Card Management,
Miscellaneous Billing, F&A Processes and Decision Support & Analytics. As a strategic partner to IATA, it delivers
robust industry solutions including BSP, BSP Link, Neutral Fare Proration (NFP) and Simplified Interline
Settlement (SIS).
Experience and knowledge of the airline industry enables the company to upgrade processes to industry best
standards. The company is present in 10 countries and employ over 2000 professionals across the globe.
Business Area
Airline Financial Solutions
� Revenue Accounting
� Miscellaneous Billing
� Refund Management
� Audit and Revenue Recovery
Airline Commercial Solutions
� Decision Support Solution
� Fare Management
Industry Solutions
� Simplified Interline Settlement (SIS)
� Neutral Fare Proration Engine
Subsidiary Companies
a) Kale Softech Inc.
b) Kale Revenue Assurance Services Limited
c) Zero Octa UK Limited
Financial Highlight CONSOLIDATED (A*- Actual, E* -Estimations & Rs. In Millions)
Balance sheet as at JUNE 30th, 2012-2015E
FY12A FY13A FY14E FY15E
EQUITY AND LIABILITIES:
Shareholders’ Funds:
Share Capital 149.27 149.27 149.27 149.27
Reserves and Surplus 1226.07 870.28 1131.36 1357.64
1) Sub Total Net worth 1375.34 1019.55 1280.63 1506.91
Non-Current Liabilities:
Long-term borrowings 0.68 0.05 0.00 0.00
Other Long Term Liabilities 10.26 14.52 16.70 18.70
Long Term Provisions 80.05 123.58 76.62 84.28
2) Sub Total Non-Current Liabilities 90.99 138.15 93.32 102.98
Current Liabilities:
Trade Payables 38.49 92.93 96.65 104.38
Other Current Liabilities 174.96 56.76 325.50 397.11
Short Term Provisions 300.72 994.21 835.14 885.24
3) Sub Total Current Liabilities 514.17 1143.90 1257.28 1386.73
Total Liabilities (1+2+3) 1980.50 2301.60 2631.24 2996.62
ASSETS:
Non-Current Assets:
Fixed Assets
Tangible Assets 163.40 206.83 247.21 286.76
Intangible Assets 121.71 120.25 129.87 137.66
Capital work-in-progress 27.79 0.12 0.13 0.15
Intangible Asset under Development 0.44 19.29 21.99 24.41
a) Sub Total Fixed Assets
399.20 448.98
b) Goodwill on consolidation 402.11 416.84 491.87 541.06
c) Deferred tax assets (net) 67.49 79.42 89.74 97.82
d) Other non-current assets 0.11 0.15 0.35 0.41
e) Non Current Investments 0.06 0.06 0.07 0.08
f) Long Term Loans and Advances 76.40 110.49 143.64 169.49
4) Sub Total Non-Current Assets 859.51 953.45 1124.88 1257.84
Current Assets:
Current Investments 0.00 375.64 450.77 522.89
Trade Receivables 317.70 333.91 420.73 485.81
Cash and Bank Balances 400.63 344.69 317.11 358.34
Short Term Loans and Advances 132.74 58.08 105.50 127.66
Other Current Assets 269.92 235.83 212.25 244.08
5) Sub Total Current Assets: 1120.99 1348.15 1506.36 1738.78
Total Assets (4+5) 1980.50 2301.60 2631.24 2996.62
Annual Profit & Loss Statement for the period of 2012 to 2015E
Value(Rs.in.mn) FY12A FY13A FY14E FY15E
Description 12m 12m 12m 12m
Net Sales 2295.87 3038.37 3281.44 3609.58
Other Income 0.00 47.91 55.10 58.40
Total Income 2295.87 3086.28 3336.54 3667.99
Expenditure -1612.65 -1734.68 -1903.23 -2093.56
Operating Profit 683.22 1351.60 1433.30 1574.43
Interest -7.91 -5.28 -5.54 -5.88
Gross profit 675.31 1346.32 1427.76 1568.55
Depreciation -80.70 -115.26 -129.09 -142.00
Exceptional Items 7.77 0.00 0.00 0.00
Profit Before Tax 602.38 1231.06 1298.67 1426.55
Tax -194.52 -387.30 -415.57 -450.79
Net Profit 407.86 843.76 883.09 975.76
Equity capital 149.27 149.27 149.27 149.27
Reserves 1226.07 870.28 1131.36 1357.64
Face value 10.00 10.00 10.00 10.00
EPS 27.32 56.53 59.16 65.37
Quarterly Profit & Loss Statement for the period of 30th June, 2013 to 31st March, 2014E
Value(Rs.in.mn) 30-Jun-13 30-Sep-13 31-Dec-13 31-Mar-14E
Description 3m 3m 3m 3m
Net Sales 792.78 796.95 736.98 795.94
Other income 12.93 13.26 15.03 15.93
Total Income 805.71 810.21 752.01 811.87
Expenditure -502.21 -536.80 -415.52 -453.68
Operating profit 303.50 273.41 336.49 358.19
Interest -1.18 -1.12 -1.23 -1.41
Gross profit 302.32 272.29 335.26 356.77
Depreciation -27.95 -29.76 -30.03 -31.23
Profit Before Tax 274.37 242.53 305.23 325.54
Tax -84.99 -76.92 -102.20 -103.20
Net Profit 189.38 165.61 203.03 222.34
Equity capital 149.27 149.27 149.27 149.27
Face value 10.00 10.00 10.00 10.00
EPS 12.69 11.09 13.60 14.90
Ratio Analysis
Particulars FY12A FY13A FY14E FY15E
EPS (Rs.) 27.32 56.53 59.16 65.37
EBITDA Margin (%) 29.76% 44.48% 43.68% 43.62%
PBT Margin (%) 26.24% 40.52% 39.58% 39.52%
PAT Margin (%) 17.76% 27.77% 26.91% 27.03%
P/E Ratio (x) 27.34 13.22 12.63 11.43
ROE (%) 29.66% 82.76% 68.96% 64.75%
ROCE (%) 55.52% 143.87% 122.00% 113.90%
EV/EBITDA (x) 15.74 7.99 7.56 6.85
Book Value (Rs.) 92.14 68.30 85.79 100.95
P/BV 8.11 10.94 8.71 7.40
Charts
Outlook and Conclusion
� At the current market price of Rs.747.00, the stock P/E ratio is at 12.63 x FY14E and 11.43 x FY15E
respectively.
� Earning per share (EPS) of the company for the earnings for FY14E and FY15E is seen at Rs.59.16 and
Rs.65.37 respectively.
� Net Sales and PAT of the company are expected to grow at a CAGR of 16% and 34% over 2012 to 2015E
respectively.
� On the basis of EV/EBITDA, the stock trades at 7.56 x for FY14E and 6.85 x for FY15E.
� Price to Book Value of the stock is expected to be at 8.71 x and 7.40 x respectively for FY14E and FY15E.
� We recommend ‘BUY’ in this particular scrip with a target price of Rs.815.00 for Medium to Long term
investment.
Industry Overview
The IT&ITeS industry in India has today become a growth engine for the economy, contributing substantially to
increases in the GDP, urban employment and exports, to achieve the vision of a powerful and resilient India.
Indian firms, across all other sectors, largely depend on the IT & ITeS service providers to make their business
processes efficient and streamlined. Indian manufacturing sector has the highest IT spending followed by
automotive, chemicals and consumer products industries.
Market Size
India’s total IT industry’s (including hardware) share in the global market stands at 7 per cent; in the IT segment
the share is 4 per cent while in the ITeS space the share is 2 per cent. The industry is dominated by large
integrated players consisting of both Indian and international service providers. During the year, the share of
Indian providers went up to 65 per cent-70 per cent due to the emerging trend of monetisation of captives.
India's IT and BPO sector exports are expected to grow by 12-14 per cent in FY14 to touch US$ 84 billion - US$ 87
billion, according to Nasscom.
IT spending in India is projected to reach US$ 71.5 billion in 2013, an increase of 7.7 per cent as compared to US$
66.4 billion projected for 2012, as per a report by Gartner.
The enterprise software market in India is expected to reach US$ 3.92 billion in 2013, registering a growth of
13.9 per cent over 2012 revenue of US$ 3.45 billion, according to Gartner.
Investments
Indian IT's core competencies and strengths have placed it on the international canvas, attracting investments
from major countries.
Between April 2000 and June 2013, the computer software and hardware sector attracted cumulative foreign
direct investment (FDI) of Rs 53,757.60 crore (US$ 7.97 billion), according to Department of Industrial Policy
and Promotion (DIPP).
More recently, online retailing, cloud computing and e-commerce are the major driving forces behind the rapidly
increasing growth in the IT industry. Online shopping has increased with the emergence of internet retailing and
e-commerce.
Some of the major investments in Indian IT and ITeS sector:
• Baring Private Equity Partners Asia plans to buy IT services firm Hexaware Technologies in a deal
estimated at about US$ 400 million
• Cognizant has been selected by the Saudi Electricity Company (SEC) to develop a comprehensive billing
and revenue management solution based on SAP utilities enterprise software to meet the functional,
technical, and operational requirements of SEC's rapid growth
• Prisma Global has acquired majority stake in German technology venture Prisma Gmbh for about Rs 27
crore (US$ 4.00 million). The company will now own the Intellectual Property (IP) of technologies
developed by the German firm
• Wipro Ltd have secured a large IT outsourcing contract worth US$ 500 million from the US-based
financial services company Citigroup. Wipro will be responsible for application development and
maintenance, as well as providing infrastructure management services, for Citi's global operations
• Tech Mahindra has signed a five-year agreement with UBS Fund Services (Luxembourg) (UBS FSL) for its
new platform, Tech Mahindra Managed Data Services (MDS), designed to support asset managers, wealth
managers, investment banks, custodians and administrators. The company’s Brazilian subsidiary
Complex IT has also signed two deals to deliver enterprise solutions for oil and gas, and banking sector
Government Initiatives
As a part of the National Electronics Policy, the Government of India is planning to set-up 15 new laboratories
under public-private-partnership (PPP) model for hardware and software testing. The labs will facilitate
registration and testing of IT products before they are launched in the market.
FDI upto 100 per cent under the automatic route is allowed in Data processing, software development and
computer consultancy services; software supply services; business and management consultancy services,
market research services, technical testing & analysis services.
In the 12th Five Year Plan (2012-17), the Department of Information Technology proposes to strengthen and
extend the existing core infrastructure projects to provide more horizontal connectivity, build redundancy
connectivity, undertake energy audits of State Data Centers (SDCs) etc. The core infrastructure including fibre
optic based connectivity will be leveraged and additional 150,000 Common Service Centres (CSCs) will be setup
to create the right Governance and service delivery ecosystem at the Panchayats.
Some of the major initiatives taken by the Government to promote IT and ITeS sector in India are:
• The Government of India has fast tracked the process of setting up of centres of National Institute of
Electronics and Information Technology (NIELIT) in Northeast India
• The Government of Brazil has liberalised the issue of short term work visas, a move which will make it
easier for Indian IT professionals to take up assignments in Brazil
• India and Vietnam have signed two memorandums of understanding (MoU) for partnership in the field of
information, communications and technology (ICT)
• The Cabinet has recently approved the National Policy on Information Technology 2012. The policy aims
to increase revenues of IT and ITES industry from US$ 100 billion to US$ 300 billion by 2020 and expand
exports from US$ 69 billion to US$ 200 billion by 2020
• The Government of India plans to set up 15 new laboratories for testing hardware and software products
under public-private partnership (PPP) model
Road Ahead
As IT is increasingly gaining traction in small and medium business activities, the sector offers impressive growth
opportunities and is estimated at approximately US$ 230 billion–US$ 250 billion by 2020. In a bid to reduce cost,
governments across the world are exploring outsourcing and global sourcing options.
Technologies, such as telemedicine, mHealth, remote monitoring solutions and clinical information systems,
would continue to boost demand for IT service across the globe. IT sophistication in the utilities segment and the
need for standardisation of the process are expected to drive demand.
Digitisation of content and increased connectivity is leading to a rise in IT adoption by media. Emerging
technologies present an entire new gamut of opportunities for IT firms in India. Social, mobility, analytics and
cloud (SMAC) provide US$ 1 trillion opportunity. Cloud represents the largest opportunity under SMAC,
increasing at a CAGR of approximately 30 per cent to around US$ 650 billion–US$ 700 billion by 2020. Social
media is the second most lucrative segment for IT firms, offering a US$ 250 billion market opportunity by 2020.
Disclaimer:
This document prepared by our research analysts does not constitute an offer or solicitation for the purchase or sale
of any financial instrument or as an official confirmation of any transaction. The information contained herein is
from publicly available data or other sources believed to be reliable but do not represent that it is accurate or
complete and it should not be relied on as such. Firstcall India Equity Advisors Pvt. Ltd. or any of it’s affiliates shall
not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the
information contained in this report. This document is provide for assistance only and is not intended to be and must
not alone be taken as the basis for an investment decision.
Firstcall India Equity Research: Email – [email protected]
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U. Janaki Rao Capital Goods
B.Anil Kumar Auto, IT & FMCG
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M. Vinayak Rao Diversified
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