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Intellect Design Arena Ltd Q2FY22 consolidated revenues came in at 452.14 Cr, up 21.6% YoY and up 10.7% QoQ. EBITDA for Q2FY22 stood at 118.2 Cr, up 36.8% YoY and up 17.9% QoQ....

Improving deal wins in IGCB, IGTB and iSEEC, increased penetration in the US & Europe market, digital-ready product portfolio, healthy pipeline, huge addressable & underpenetrated market and improved annuity revenues bode well for revenue growth. In addition, healthy margins prompt us to revise our EPS estimates upwards by ~10% and ~13% for FY22E & FY23E, respectively. This, coupled with improving cash flows, prompts us to upgrade the stock from HOLD to BUY with a revised target price of | 875 (6x...

The company registered healthy revenues in Q3FY21. Intellect also won six large deals in the quarter representing improving revenue visibility in coming quarters. In addition, the company has a healthy order backlog of | 1203 crore, a strong deal funnel (~| 4162 core) and a digital-ready product portfolio that provides confidence on improved revenue trajectory in coming years. This, coupled with penetration in the US market, traction in iGCB (retail banking focused software product) revenues, improving quality of revenues (licence + AMC as percentage of revenues has increased from...

Intellect Design (INDA) reported 7.6% YoY growth in its revenues to $50.1mn ahead of DE at $49mn and significant turnaround on EBIT margins at 19% (up 400bps QoQ, was loss making in YoY period) in Q2FY21, beating our expectations. Commentary remains confident on sustaining revenue traction in the near future, given its strong deal win momentum (6 digital wins & 4 large deal wins), order book traction (up 8.5% YoY to Rs11.9bn), large funnel (pursuit $540mn) and strong recurring revenues (up 25% on TTM basis)...

The company has historically seen higher debtor days that has led to high working capital requirement and even equity dilution. However, Intellect has now modified its incentive structure to improve collections. The same is visible in Q1FY21 results (debtor days is down to 126 days from 150 days). Lower working capital requirement, improving margins may boost operating...

Intellect's growth engine has witnessed slowdown due to delay in decision making (Brexit), deferral of large deals, accelerated shift to cloud (iGCB and iGTB) and absence of licence component in cloud wins. Shift to cloud model will impact near term growth but building of annuity SaaS revenue will improve predictability and profitability. Cost control measures have been satisfactory and margins will recover with growth. The deal funnel stands at healthy USD 524mn with 134 opportunities. We maintain our positive stance based on (1) Huge addressable market opportunity (2) Highly-rated and digital-ready product portfolio, (3) Healthy funnel, and (4) Focus on large deal wins. We estimate USD revenue growth of 1.5/16.0% for FY20/21E. Risk to our thesis includes prolonged delay in decision making and US/UK slowdown. We maintain BUY on Intellect despite a weak 2QFY20. Deferral of few large deals and accelerated shift to cloud has impacted growth. Large deal funnel remains healthy but decision making is taking longer than expected. 2H will witness growth and margin recovery but we cut our FY20/21E revenue est. by 6.6/6.7% to factor in weak 1H and delay in deal conversion. We have a TP of Rs 288, assigning 2.0x EV/rev multiple to Sep 21E revenue.

Intellect's investment in sales engine coupled with discipline in deal and geography selection has resulted in improved win ratio. The existing investments are sufficient to deliver growth of 20% and no further dilution is required. The deal funnel stands at healthy USD 515mn with 133 opportunities. Cloud partnerships with global cloud leaders will help scale SaaS revenue, which is of annuity nature and higher margin. We maintain our positive stance based on (1) Huge addressable market opportunity (2) Highly-rated and digital-ready product portfolio, (3) Healthy order book, and (4) Focus on large deal wins. We estimate USD revenue growth of 10.3/17.0% for FY20/21E. Risk to our thesis includes slowdown in deal wins, increase in R&D and SG&A investments, and global slowdown. We maintain BUY on Intellect despite weak 1QFY20. Growth will recover based on strong order backlog (+20% YoY) and healthy funnel comprising of large deals (41 deals of size >USD 5mn). Deal sizes are increasing with increased product acceptance. We have a TP of Rs 300, assigning 2.0x EV/rev multiple to June 21E revenue.