Kellton Tech Solutions Ltd - Dealmoney Special report (1)

Kellton Tech Solutions Ltd.
CMP: Rs 71.15
Kellton Tech Solutions Ltd. (Kellton) is a new age IT services
company with global footprint in the US, United Kingdom,
Ireland, Singapore, and India. The Company offers digital
solutions, advisory services, along with serving as systems
integrator to over 300 clients globally, ranging from start-ups
to Fortune 1,000 enterprises.
The company has vast experience in rendering its services to
various industry verticals such as retail and e-commerce;
travel, tourism and hospitality; healthcare, energy, BFSI;
media, entertainment and lifestyle, amongst others. The
company has meticulously built a comprehensive and
impressive portfolio through strategic acquisitions in the
United States, India, and Singapore.
Digital Transformation will enable the company to grow
further: COVID-19 crisis has provided a hidden opportunity
and paved a way for more need of digital transformation as a
critical enabler of future success. The COVID-19 pandemic,
however, has forever changed the traditional behaviors of
organisations. The fear of the fallout has pushed
organizations to incorporate the digital element in everything
they do and operate effectively around stay at-home orders
imposed all across the world. Leaders are rushing to adopt
technology-first frameworks to enable delivery at scale and
drive customer service relevance.
The company have launched a bevy of measures to offer
continued support to its customers and strengthen their
ability to respond. The company is pumping strategic
investments in its indigenous OPTIMA platform and offering
it under a subscription-based model to encourage
personalization. They proactively engaged in exploring more
avenues of expansion with a focus on establishing long-term
resilience strategies that could be instrumental in helping its
customers out maneuver the crisis and better prepare for
future disruptions.
New partnerships to provide synergies for growth: Kellton
Tech has Expanded Its Partnership with Google Cloud’s
Apigee API Platform, to transform digital user experiences
faster and more seamlessly. It also announced Partnership
with Workato to Accelerate Enterprise iPaaS Integration and
Automation. Kellton Tech has Partnered with Automation
Anywhere to Create End-to-End Transformative Experiences
for Customers. This altogether will provide a path for the
company to further grow its services to its clients.
Valuation: We like the company on the back of Digital
Transformation in the all parts of the economy which will lead
to growth in this sector. The company is trading at an FY21 PE
of 7.3x, we place our target at Rs. 103
Target: Rs103
NSE/BSE Code KELLTONTEC / 519602
Sector
Industry
IT
IT - Software
Face value/Book Value (Rs.per share) 5 / 46.7
Dividend yield(%) -
52H/L(Rs.) 86 / 7
Market Cap.(Rs.mn) 12,226
Shares Outstanding (mn) 96.4
(In Rs. mn) FY17 FY18 FY19 FY20
Net Sales 6,148 7,835 8,141 7,707
Sales Growth 71.4% 27.4% 3.9% -5.3%
EBITDA 820 1,184 1,179 1,124
EBITDA Margin 13.3% 15.1% 14.5% 14.6%
PAT 531 684 769 705
PAT Margin 8.6% 8.7% 9.5% 9.2%
EPS (Rs) 5.6 7.1 8.0 7.3
FY17 FY18 FY19 FY20
P/E (x) 23.0 17.9 15.9 17.3
P/B (x) 6.9 4.7 3.7 2.9
EV/Sales 2.1 1.7 1.6 1.7
EV/EBITDA 15.9 11.0 11.0 11.6
ROE 32.0% 34.5% 28.1% 21.0%
ROCE 35.2% 31.5% 26.3% 19.0%
Qtr Earnings (in Rs.
cr)
Q2FY21 Q1FY21 Q-o-Q % Q2FY20
Net Sales 190.9 180.0 6.0 186.6
Total Expenditure 165.8 156.7 5.8 156.9
PBIDT (Excl OI) 25.1 23.3 7.5 29.7
PAT 15.879 14.46 9.81 18.491
PBIDTM% (Excl OI) 13.13 12.95 1.39 15.92
PBIDTM% 13.6 14.03 -3.06 16.27
PATM% 8.32 8.03 3.61 9.91
Adj. EPS(Rs) 1.65 1.5 10 1.92
Source: Ace equity, Dealmoney research, company
6 th January 2021
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Kellton Tech Solutions Ltd.
CONSOLIDATED INCOME STATEMENT
INCOME STATEMENT (INR Mn) FY17 FY18 FY19 FY20 FY21
Revenue from operations 6,148.0 7,835.0 8,141.0 7,707.0 8,477.7
Other Income 37.0 27.0 51.0 39.0 56.0
Total Income 6,185.0 7,862.0 8,192.0 7,746.0 8,533.7
Total Expenses 5,328.0 6,650.0 6,962.0 6,583.0 6,951.7
EBITDA 857.0 1,212.0 1,230.0 1,163.0 1,582.0
EBITDA Margin 13.9% 15.4% 15.0% 15.0% 18.7%
Depreciation 42.0 54.0 67.0 128.0 144.0
Finance Cost 103.0 163.0 189.0 164.0 164.0
PBT 712.0 995.0 974.0 871.0 1,274.0
Tax 181.0 311.0 205.0 165.0 254.3
Profit After Tax 531.0 684.0 769.0 705.0 1,019.7
PAT Margins 8.6% 8.7% 9.4% 9.1% 12.0%
EPS (INR) 5.4 6.6 7.8 7.7 10.6
PE(x) 23.0 17.9 15.9 17.3 7.3
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Kellton Tech Solutions Ltd.
Analysts: -
Pragnesh Jain- Research Head
Rohitkumar Rai - Research Analyst
pragnesh.jain@dealmoney.in
rohitkumar.rai@dealmoney.in
For private circulation only
Website: www.dealmoneyonline.com
SEBI Research Analyst Registration No: INH000002319
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