Intellect Design Q2 Review - Revenue Below Estimate; OPM Headwinds Ahead, Commentary Assuring: Dolat Capital

Dolat Capital Report

Intellect Design Arena Ltd. reported 3.2% QoQ decline in rev at Rs 6.2 billion (our estimate: 6.5 billion) led by deferral of two deals of Rs 150 million each.

License revenue witnessed a sharp decline in revenue (-32% QoQ). Assets under management/cloud revenues grew by 5.7%/4.3% sequentially.

Operating profit margin contracted by 377 basis points QoQ at 14.4% (our estimate: 18.3%) owing to weak revenue recognition due to deferment of two deals and unfavorable mix.

Management remains cautiously optimistic on growth in FY24 due to uncertain geo political environment, hence guiding revenue growth of 15%+ (earlier 15-20%), but remains confident on 30% Ebitda growth in FY24.

Despite result miss and cautious commentary, we believe Intellect Design Arena will overcome short term macro headwinds, given sustained traction for core modernisation across key markets and thus assign 'Buy' rating on the stock with target price of Rs 780 per share (implies 20 times on FY26E earnings).

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