JP Morgan recommends 'Overweight' rating on Polaris Software
JP Morgan initiates coverage on Polaris Software with `Overweight' rating with a June-10 P/E-based price target of Rs 225.
By ET Bureau |
POLARIS SOFTWARE
RESEARCH: JP MORGAN
RATING: OVERWEIGHT
CMP: RS 148
JP Morgan initiates coverage on Polaris Software with `Overweight' rating with a June-10 P/E-based price target of Rs 225. Polaris is one of the most leveraged plays in the Indian IT sector to the recovery of the global banking, financial services and insurance industries (BFSI), with 90% of its revenue from this segment. With Citibank already an anchor client and investor, the global recovery is leading to good business traction at Polaris. JP Morgan expects this traction to drive a 26% EPS CAGR over FY10-12 , leading to a gradual stock re-rating , driving our positive view. Several large Indian IT companies have seen more deal closures from BFSI companies worldwide , and the mid-cap sector is beginning to see positive momentum now. JP Morgan expects Polaris to benefit from this, given its significant expertise in the BFSI sector. Operating leverage combined with the elimination of hedging losses should drive a good 26% EPS CAGR in FY10-12 E, after 13% growth in FY10E. The price target is based on 11x forward P/E, at a 10-20 % discount to other mid-caps in the sector due to its high sector focus.
RESEARCH: JP MORGAN
RATING: OVERWEIGHT
CMP: RS 148
JP Morgan initiates coverage on Polaris Software with `Overweight' rating with a June-10 P/E-based price target of Rs 225. Polaris is one of the most leveraged plays in the Indian IT sector to the recovery of the global banking, financial services and insurance industries (BFSI), with 90% of its revenue from this segment. With Citibank already an anchor client and investor, the global recovery is leading to good business traction at Polaris. JP Morgan expects this traction to drive a 26% EPS CAGR over FY10-12 , leading to a gradual stock re-rating , driving our positive view. Several large Indian IT companies have seen more deal closures from BFSI companies worldwide , and the mid-cap sector is beginning to see positive momentum now. JP Morgan expects Polaris to benefit from this, given its significant expertise in the BFSI sector. Operating leverage combined with the elimination of hedging losses should drive a good 26% EPS CAGR in FY10-12 E, after 13% growth in FY10E. The price target is based on 11x forward P/E, at a 10-20 % discount to other mid-caps in the sector due to its high sector focus.
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