STOCK IN FOCUS
* Majesco Limited’s stock rose by 0.6% in yesterday’s trade, while the BSE Sensex declined 0.4%.
* The company reported 1.2% QoQ growth in 1QFY20 USD revenue, with Cloud implementation (-18.9% QoQ) falling steeply owing to the MetLife deal going live; on the other hand, Cloud subscription revenue declined 2.8% QoQ. Licence revenue surged 144% QoQ owing to an extra US$ 2 million recognised due to change in accounting policy (Ind AS 115); recurring revenue rose 6.4% QoQ in USD terms, accounting for 32.5% of revenue.
* Adjusted EBITDA margin rose by 218 bps QoQ to 13%. f Industry fundamentals and the key IBM partnership will enable Majesco to boost revenue growth going forward.
* Cloud offering - ‘Trump Card’: 60-70% of the deal pipeline in the past few months has been for cloud services.
* Post go-live, Majesco will start to earn minimum committed revenue (MCR) from MetLife, which involves minimum additional cost, driving good scope for margin improvement.
* Of the addressable market of US$25bn for Majesco, around US$15-16bn relates to the L&A market, while US$9.25bn relates to the US P&C market.
* We currently have a target price of Rs 590 on the stock.
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