Stock Tip: Sonata Software – on the way to becoming a major IT player !!

Sonata software Ltd

Price : Rs 146                         Date: 13th Feb 2015

Target: Rs 300                        Time Frame: 3 years

Sonata Software has business around the world. It has several subsidiaries around the world. So, one should look at the consolidated financials to arrive at the valuation. The standalone results and the valuation shall be misleading and shall show it as an expensive stock. Sonata, unlike other software companies, has a large domestic business of about 60 – 65%. And the exports contribute to the rest. There is immense potential in the domestic business due to the DIGITAL INDIA initiatives. The company has been making good profits from the local projects in the last few quarters. The best signal for the company is the excellent improvement in numbers for the 9 months in FY 15. See the company’s fundamentals on a consolidated basis below.

-       RoE ( TTM till Dec 14 ) : 32.72% -       RoE ( FY 14 ): 20.77%	-       RoCE ( TTM till Dec 14 ) : 28.92% -       RoCE ( FY 14 ): 16.91%
-       Cons Sales ( TTM till Dec 14 ): Rs 1629 Cr -       MCap ( 13th Feb 15 ): Rs 1531 Cr	-       Net Profit (TTM till Dec 14): Rs 122.41 Cr
-       Op profit ( TTM till Dec 14 ): Rs 167.2 Cr	-       Op cash flow ( FY 14 ): 129 Cr
-       EPS (TTM till Dec 14): 11.64	-       Current P/E ( TTM ): 12.50
-       MCap to Sales ( TTM ): 0.94 Times	-       MCap to Op Profit ( TTM ): 9.15 Times

The company had a RoE and RoCE of 20% and 17% till FY14 quarter but moved to more than 32%(TTM ) and 29% (TTM ) due to the excellent 9 months performance till Dec 14 quarter. The company looks to offer deep value in following

-     

          TTM PE is just 12.50.

-       The MCap to Sales TTM ratio is just 0.94 times

-       The MCap to Operating profit in just 9.15 times

-       The MCap to Net Profit ( TTM ) is just 12.50 times.

All the above numbers show that the company is quoting very cheap. BUY IT BEFORE OTHERS AS IT IS GOING TO MOVE UP LIKE MINDTREE and PERSISTENT. 
Feel Free to comment your views on this stock

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Disclaimer: I will have an interest in the stock. Make your own judgement and consult your financial advisor.

Follow me at Twitter: @rvetri

www.stocks2brich.blogspot.com

www.a1moneytips.blogspot.com

Kuantum Papers: for > 50% gains as positional trade

Kuantum Papers Ltd: A Terrific value buy

Kuantum Papers Ltd ( listed only at BSE )

Price : Rs 88        Date: 16^th Jan 2015

Upside: 50% to 100%      Time Frame: 6 Months to 1 year

Kuantum papers is a very decent paper manufacturing company with sales and profit growing at 16% and 22.33% in last 3 years. It has a very good RoE of 36.30% and RoCE of 21% and with a good working capital cycle. See the company’s fundamental below.

Return on Equity ( 2013 – 14 ) :   36.30 %	Return on Capital employed ( 2013 – 14 ) : 21 %
Sales ( CAGR last 4 years ): 16 %	Net Profit Growth ( CAGR last 4 years ): 22.33 %
Net Working Capital Cycle (13 – 14 ) : 33 days	Operating cash flow ( last 3 years ): 157 Cr
EPS CAGR Growth ( last 3 years ): 22 %	Current P/E ( TTM ): 2.3
MCap to Sales ( TTM ): 0.16 Times	MCap to Operating Profit ( TTM ): 1 Time

The striking undervaluation is that the current market cap is just one time its Operating profit and just 2.33 times its Net profit for FY 2013-14. This undervaluation is a great opportunity to have a positional trade to make a 50 – 100% gain in the next 6 – 12 months

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Disclaimer: I will have an interest in the stock

Follow me at Twitter: @rvetri

www.stocks2brich.blogspot.com

www.a1moneytips.blogspot.com

R S Software : A value pick and get rich Indian stock

R  S Software - an Indian multi bagger stock
Price: Rs 551.60 ( 29th Dec 2014 )      Target: 3 bagger by 2017

Area of operation: Building Software for the e-Payment industry. Vast potential to scale up
Look at the impeccable track record in the past.

Return on Equity ( 2013 – 14 ) :   36.40 %	Return on Capital employed ( 2013 – 14 ) : 53.4%
Sales ( CAGR last 3 years ): 23.2 %	Net Profit Growth ( CAGR last 3 years ): 36.40 %
Net Working Capital Cycle (13 – 14 ) : 30 days	Operating cash flow ( last 4 years ): 101 Cr
EPS CAGR Growth ( last 4 years ): 36.40 %	EPS ( TTM ): 48      Current P/E: 11.47
MCap to Sales ( TTM ): 2 Times	MCap to Operating Profit ( TTM ): 7.7 Times

A steady growth company in the sunrise sector with its market cap at only 7.7 times its operating profit. With healthy RoE and RoCE and good cash flows. A take over target by any of the IT major is a possibility. Grab it

Disclaimer: I will have a vested interest in the stock

Feel Free to comment your views on this stock  

Follow me in Twitter: @rvetri