Polaris Consulting & Services Ltd. share price target

BUY Polaris Consulting & Services Ltd at CMP Rs. 197 and add on dips to Rs. 170-174 for the sequential targets of Rs. 241 & Rs. 276

In Dec-14, Indian software services firm Polaris decided to spin-off its product arm into a separate listed entity, Intellect Design Arena Ltd, to create a pure play BFSI-focused product company.HDFC Securities Initiate coverage with a BUY with TP of Rs 280 is based on a 2.5x EV/revenue multiple, implying 37% upside and is at >60% discount to rival Temenos’ EV/revenue multiple.

Trendlyne has 3 reports on POLARIS updated in the last year from 3 brokers with an average target of Rs 258.

EBITDA% improved to 13.8%, +30bp qoq and +230bp yoy with tailwinds such as INR depreciation and increase in fixed-price mitigating the furlough impact. PAT stood at Rs365mn impacted by Rs106mn exceptional pertaining to provisioning of one-time transaction cost associated with purchase agreement by Virtusa. Utilization was lower at 74.3%, -2.2% qoq impacted by Chennai floods. Employee headcount increased to 7,738, 90 additions in 3Q;...

Restructuring effort as positive for Polaris being separate entity: The demerger of the product business is a decisive step that the managementtook to unlock the potential of the company to respond to emerging opportunities in Financial Technologies. The company realized that the opportunities in services and product businesses were turning out to be substantially higher. The services business is a predictable growing business with a revenue contribution of around 80 percent over consolidated revenue however the product business generating revenue of over Rs. 5000 mn annually which is around 20 percent of the company's total revenue till FY14.