Accumulate Glodyne Techno; target Rs 440: Unicon Investment

Unicon Investment is bullish on Glodyne Technoserve Limited (GLTL) and has recommended accumulate rating on the stock with a target price of Rs 440 in its March 30, 2012 research report.

"Glodyne Technoserve Limited (GLTL) is primarily engaged in technology management services, which is platform driven and outcome based. The company is engaged in providing services across 10 sectors, such as government/public sector units (PSU), information technology / information technology enabled services, Banking, Financial Services and Insurance, education in India and North America. As of march 31, 2011, it had 42% of its business coming from the United States geography. During fiscal 2011, the Company had presence in India, Canada and United States of America. During the fiscal year ended March 31, 2011(fiscal 2011), it acquired DecisionOne Corporation."

"Presence in the high growth E-Governance space: GLTL has an established presence in the high growth sectors of E-Governance and Education sectors in India. These sectors are expected to show rapid growth in the years ahead. The e-governance sector is experiencing an expansion driven in part by transparency, accountability and higher service level expectations from the government by citizens. The company has won credible projects from Govt of Bihar and Maharashtra which gives strong visibility over the next few years. Also the company has been able to maintain strong growth and profitability in the e-governance business."

"Expecting turnaround in US IMS business: With the acquisition of DecisionOne, the company has gained a strong global footprint in IMS. GLTL will now have access to the North American technology services market where it can expand its services portfolio. They gain access to service delivery platform and can leverage these capabilities on a global basis. GLTL plans to efficiently manage costs and improve their margins moving ahead by utilizing offshore platforms. The company has taken several steps to improve profitability of the US business. Glodyne expects EBIDTA margins to improve from 8 percent to about 12 percent on account of cost savings which should make the US business profitable which is currently dragging down the consolidated numbers. Also debt component which increased largely on account of this acquisition should be reasonably manageable once the US business turns around."

"Sustainable long-term Financial Inclusion Services (FIS) and Education Managed Services (EMS) model: GLTL is in the process of implementing the largest urban as well as rural financial inclusion schemes in India, with a vision of obtaining market leadership position within this space. Due to their established presence in the e-governance space, GLTL has been able to partner with banks and participate along with BC's to provide end to end solution driven by technology. GLTL is also partnered with leading schools, colleges and institutions in the process of automation using its versatile and comprehensive e-learning platform. The FIS and EMS model implemented by the company has created a long term revenue generation stream which has tremendous growth potential moving ahead."

"GLTL's US business will contribute around 40 percent to the topline while domestic IMS business will contribute to another 25 percent. The rest will be contributed by egovernance, financial inclusion and education software business. For FY12, GLTL consolidated revenue is expected above Rs 26 bln. At CMP the stock trades at 8 X FY12 earnings and thus offers room for upside from a medium term perspective. Given the recent stock price run up in anticipation of some order flow, we would prefer to accumulate the stock on declines from a medium to long term perspective. Changing business mix, turnaround in US business, visible scale up in financial inclusion and education business, reduction in promoter pledges are some of the triggers for the stock from a near term perspective. From a one year perspective, we see a potential target of 440 at 8X FY13e earnings. Accumulate for target of Rs 440," says Unicon Investment research report.