Published on 12/06/2019 9:14:24 AM | Source: Emkay Global Financial Services Ltd

Buy Majesco Ltd For The Target Rs.700 - Emkay Global

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On the right track

* Majesco delivered in-line 3.7% qoq CC revenue growth in Q4FY19. While gross margins improved ~100bps qoq, EBITDA margins declined ~350bps and fell short of our estimate due to a one-time client settlement and higher variable payouts to employees.

* For FY19, Majesco delivered strong revenue growth of ~13.4%/22.6% in CC/INR terms and a margin improvement of ~700bps on a yoy basis. Growth and margin improvement were driven by a strong ~65% yoy growth in high-margin cloud revenues (~41% of sales)

* Majesco expects better branding efforts, diversified offerings/delivery, partnerships (with system integrators like Capgemini/Insurtechs) and M&As to drive growth in FY20. However, confirmed order backlog at ~USD97mn grew modestly by ~5% yoy in Q4FY19.

* Strong all-round financial performance in FY19 and right changes in its strategy keep us excited on its long-term growth prospects. We maintain our Buy rating with a DCF-based target price of Rs700.


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