Recommendations From IT Consulting & Software Sectors

This column gives you scrip chosen by the research team during the fortnight that is fundamentally strong and expected to give good capital appreciation over a time period of 1 year

Take Solutions

TAKE THIS SOLUTION TO MAKE PROFIT!

Take Solutions operates in a niche technology-led segment and offer services to the life sciences industry which accounts for almost 91 per cent of the total revenue. The company provides IP-based solutions in clinical, regulatory, safety and consulting processes to global life science companies across multiple therapeutic areas. 

The company also operates in the supply chain management segment, where it focuses on high-margin niches in engineering services, and supply chain collaboration. The company’s IP-led approach enables its clients to automate supply chain processes, track, trace and control at item level, mandate supplier compliance, and streamline material and shipment movement, and thus optimise their processes. The company has its presence in North America, Europe, Asia, and South America, etc. The company’s majority of the revenue come from the United States (~80 per cent), followed by APAC (13 per cent) and Europe (7 per cent). 

On financial front, looking at the last quarter of FY18, the operating revenue rose 11.3 per cent on a QoQ basis to Rs 453.9 crore. In dollar terms, the revenue during the same period rose 11.7 per cent. The operating profit (EBITDA) during the period increased almost 13.4 per cent to Rs 90.5 crore from Rs 79.8 crore in the previous quarter. In terms of bottomline, the company witnessed growth of almost 10 per cent QoQ to Rs 45 crore. 

On the valuation front, the company is currently available at reasonable valuation of 19.3x P/E on TTM earnings. In terms of return ratios, the company’s ROE and RoCE stands at 14.3 per cent and 15 per cent, respectively.

On an annual basis, the operating revenue of Take Solutions surged almost 18 per cent to Rs 1587.2 crore in FY18 from Rs 1344.5 crore in FY17. In dollar terms, its revenue rose almost 23 per cent YoY in FY18. The operating profit (EBITDA) also rose 17 per cent YoY to Rs 306.4 crore. The EBITDA margin for FY18 stood at 19.3 per cent. The net profit for the full year increased 9.4 per cent YoY to Rs 159.8 crore in FY18. 

The company’s order book for life sciences, as on FY18, stood at USD 179.5 million, which is likely to be executed in 7-9 months, which provides strong revenue visibility for the near term. Notably, the company’s management expects life sciences business to grow at 30 per cent for FY19. Overall, the management has indicated that the company is likely to witness growth of almost 22-24 per cent. Furthermore, in biosimilars, the company is witnessing traction in orders in monoclonal antibodies space, which is used to treat rare indications like rheumatoid arthritis, spot psoriasis and some rare indications of cancer. The company’s addressable market Clinical Research Organisation (CRO) is expected to grow from USD 32 billion in the year 2016 to USD 44 billion in the year 2021 (representing 7 per cent CAGR) driven by R&D spend and increasing level of clinical development outsourcing. Above all, the strengthening of USD as against INR gives further boost to the company as majority of its revenue comes from the US. Owing to all these, we urge our reader-investors to BUY the stock.