Datamatics - Stable Financials, Experienced Promoters Gives Comfort: HDFC Securities Initiates Coverage

HDFC Securities Retail Research

Datamatics Global Services Ltd. caters to a number of industry segments like banking and finance, insurance, manufacturing, telecom and retail and publishing. Company is focused on emerging business and expanding its reach by partnership and acquisitions.

Datamatics has continued to focus its efforts towards offering a comprehensive suite of customised, smart and innovative solutions, powered by artificial intelligence and machine learning, robotics, Internet of Things, cloud and mobility.

We expect, the company could get better opportunity in automation, robotics and artificial intelligence because of an early entry in the segment.

Robotic process, automation and artificial intelligence are emerging segments in the industry. Robotic Process Automation could be another game changer for IT Industry. Datamatics has entered into the segment much before its peers. RPA solutions can help enterprises simplify, automate and transform customers’ businesses.

Datamatics has been successfully using Robotic Process Automation technology as a key enabler to help clients in their digital transformation journey. Its strategy of focusing more on U.S./Europe markets and defocussing on India, hiring sales people on ground in U.S. and separating sales team for product /IP led businesses have started to bear early fruits.

Putting more technologies into internal operations could improve efficiency/productivity and successful integration of RJ Globus Philippines acquisition has helped stabilise margin profile.

Datamatic’s strong order inflow, stable financial profile led by steady revenue growth, strong liquidity profile, healthy internal accrual generation, comfortable capital structure and extensive experience of promoters in IT and ITeS industry gives us comfort.

Valuation & Recommendation:

Investors can buy in the Rs 532-552 band and add on dips in the Rs 477-495 band (11.75 times FY25E earnings per share). We believe the base case fair value of the stock is Rs 599 (14.5 times FY25E EPS) and the bull case fair value of the stock is Rs 641 (15.5 times FY25E EPS) over the next two-three quarters.

About the company:

Datamatics Global Services is a technology solution and services company, providing solutions for data driven businesses to enhance their productivity and customer experience.

The company is engaged in three key segments—digital operations, digital experience and digital technology.

The company’s customer base is diversified across various sectors, such as BFSI, manufacturing, hospitality, publishing, and international organisations, among others. The company has also developed products in robotics process automation, advanced analytics, business intelligence, and automated fare collection.

Datamatics is headquartered in Mumbai, with offices across North America, Europe, Australia and Asia, through its subsidiaries.

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