IGI Logo

Revenue growth outlook remains robust

Profitable company with 25% + revenue growth outlook led by Trust Services and the Enterprise solutions. Leader in Trust services in India with 37% market share in digital signature certificates(DSCs. Enterprise solutions to be key driver of revenue growth led by expansion into the US and Europe. The Pandemic has accelerated the shift towards digitalization thus boosting the adoption of paperless solutions and digital signature globally

Enterprise business

Revenue growth outlook remains robust at (30% +CAGR) led by the expansion of Enterprise business ( that includes Cyber security ad paperless solutions) in foreign markets of the US, Europe and Middle East 

Clients base includes marquee customers such as HDFC Bank, SBI, TCS, RBI, Abu Dhabi Bank, Tata Steel, etc. 

As of Q2FY24, Enterprise revenue split between Cyber Security and Paperless solutions is 74:26. Enterprise Revenue split between India and International is 55:45.

Acquisition of Ikon Tech is expected to strengthen its cyber security solutions and drive sales in the US market.

Trust business

The pricing pressure in the DSC segment is over and the segment is expected to grow at 15-20% CAGR, primarily led by volume driven growth.

Low penetration and rapid adoption of DSCs continue to drive higher volume of sales. It sold 2.9mn DSCs in FY23 vs 2.4mn in FY22 

Other subsegments such as eSign, SSL and device certificates are also witnessing improving traction.

Operating margin

EBITDA margin has stabilized at around 30% after being under pressure over last 1.5 years(due to pricing pressure in Trust business and expansion related costs in the Enterprise business). 

EBITDA margin is expected to improve to ~33% by FY26 led by positive operating leverage.

Other

The focus remains on organic driven growth and any acquisition will be done only to strengthen its current solutions portfolio to capitalize on strong demand environment 

Its current R&D activities include developing new use cases of PKI technology and activities related to post quantum cryptography

View and valuation

We maintain BUY recommendation on Emudhra Ltd. We estimate revenue CAGR growth of ~41.8% over FY23-FY26E, with average EBITDA margin of 32.0% during the period. Our one year target price is Rs 586, based on PER of 28x on FY26E EPS. The current valuation remains attractive as it trades at PE of 21.8x on FY26E EPS. The company continues to benefit from rapid adoption of PKI based solutions.

Please refer disclaimer at https://yesinvest.in/privacy_policy_disclaimers
SEBI Registration number is INZ000185632