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Traction across all segments for the IT industry going forward

The IT industry globally is expected to see a high growth phase on account of enhanced technology adoptions. The outbreak of covid has accelerated digital adoption, transition to cloud and automation by the businesses, which would benefit Aurionpro going forward. On account of the above factors, IT spending is expected to increase 5.3% yoy in CY22, as compared to 0.9% growth in CY20 globally according to Gartner research.

Revamped product portfolio

Aurionpro has exited the cyber security business, ISLA, on account of the failure of pick up in the segment. The company is increasing its stake in SC Soft to 100% by Dec’22, which has a global presence in smart mobility (automated fare collection). It has ventured into the data center business and has a team of industry veterans, with over 20+ years of experience in this field. Other segments like banking and smart city have picked up the pace, with order wins in the last 6-9 months. Order book including pipeline as of March 2022 stands above Rs.2,000cr.

Strong earnings trajectory, 34% earnings CAGR over FY2020-24E

Driven by further improvement in the operational efficiencies and phase-out of cyber security business, margins are expected to be at healthy rate of 22% during FY2022-24E. Also, strong traction in smart mobility & smart city and banking products will aid to 11% CAGR in topline over FY20-24E. Further, with improvement in cash flows and sale of ISLA business, management expects debt to reduce, thereby leading to a healthy & lean balance sheet to support operations going forward.

OUTLOOK & VALUATION

We forecast Aurionpro’s revenue/PAT to grow at 11%/35% CAGR over FY20-24E. Going forward, we expect the company to deliver an EPS of Rs.45 in FY24; assigning a target multiple of 7x, we arrive at a target price of Rs.315, showcasing an upside potential of 35% from current levels with an investment horizon of 18-24 months. We recommend a BUY at current levels.

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