POLARIS

Buy Polaris Financial Technology; target of Rs 180

Polaris Software Lab was incorporated in 1993 and is now one of India`s leading institutions contributing to the knowledge economy of the global financial services marketplace.

The company has registered excellent numbers for the quarter ending September 2011. The company has crossed Rs.5 billion as revenues in the current quarter ended. A sharp rise of 35% in the consolidated revenue to Rs. 5231.19 million was witnessed in the quarter as compared with Rs.3879.53 million in the same quarter last year. Operating profit moved up to Rs.755.36 million from the like quarter previous year of Rs.602.37 million. Production volume growth increased by 6.45% in the current quarter. Net profits advanced about 12% to stay at Rs.539.36 million.

Intellect flagship brand product revenue contributed Rs.1392.8 million in the current quarter, representing 27.32% of its total revenue; witnessing a jump of 68% y-o-y. Services revenue contributed 72.68% at Rs.3704.60 million to the revenues; representing a growth of 21% on y-o-y basis. Polaris has recorded 12 intellect wins across banking and insurance verticals during the quarter.

Product margin for the current quarter is at 22.12% and services margin is at 12%. Capital expenses incurred during the quarter are Rs.250 million. Revenue mix for on-site and offshore stood at 40.85% and 59.15% respectively.

Quarter revenues were well distributed with Americas contributing 45.43 %, Europe 22.40 %, IMEA 15.25 % and Asia Pacific 16.92%. Utilisation for the quarter stood at 80%.

Valuation:

With upward revision of revenue guidance and increasing deal sizes; Polaris is set to witness strong growth ahead. We expect it to clock an EPS of Rs.22.71 and Rs.27 in FY12 and FY13 respectively. We initiate a `Buy` on the stock with a target price of Rs.180 expecting an appreciation of about 43% from the current level with the medium to long term investment horizon.

Buy Polaris; target of Rs 174

Polaris Software Lab has revised its FY12 revenue guidance upwards by 2.3% to $440mn-$450mn from the earlier $430mn-$440mn.EPS guidance has been revised to Rs.22.65-Rs.23.47 from the earlier Rs.21.95-Rs.22.35. This is on the back of good traction seen in Intellect and due to demerging of its subsidiary Optimus Global Services with itself.

Revenues grew 13.2% qoq and 31% YoY at Rs.509.7crores backed by 32% qoq growth in Intellect revenues at Rs.139 crs. Services revenues grew by 7.4% QoQ. Operational margins reduced by 67 bps to 12.2%. Lower selling and general administration expenses failed to offset marginally higher development expenses. Operational margins reduced by 67 bps to 12.2%. Lower selling and general administration expenses failed to offset marginally higher development expenses. Revenues grew 13.2% QoQ on the back of good traction from Intellect. EBIDTA margins dipped 67 bps QoQ, while Profits grew 21% QoQ on the back of forex gains.

Polaris has consistently enhancing its services basket especially through its Intellect TM. Revision in the guidance has come on the back of the demerger of its subsidiary. EBIDTA margins continue to remain under pressure, while utilization levels are at its peak. We have revised sales 6% upwards for FY12E and 3.6% for FY13E, however we maintain our earlier EPS estimate due to reduction in forex gains for FY12E and FY13E. At CMP Rs.140, the stock is trading at a 6.7x and 5.9x on FY12E and FY13E EPS repectively. We reiterate our BUY rating with a price target of Rs 174 which has a potential upside of 19%.

Buy Polaris Software; target of Rs 228

Polaris registered strong revenue performance during the June quarter as Operating Income jumped up by 25% YoY and 3% QoQ to Rs 450 Crore (Q1, 12). In Dollar Terms, the Revenue growth was further better at 28% increase YoY to $101 Mln (Q1, 12) from $79 Mln last year. Under this, Software Development Services division contributed almost 99% of the OI and increased by 26% YoY and 3% QoQ to Rs 447 Crore (Q1, 12).

The Overseas business in the Software Dev division rose by 26% YoY to Rs 403 Crore (Q1, 12) while growth on the Domestic front too remain healthy at 28% to Rs 44 Crore (Q1, 12). With respect to the geographical balance, America contributed 47%, Europe 25%, IMEA 12% and Asia Pacific contributed 17%. The management has also enhanced its revenue guidance for FY 12 to $430-440 Mln as against $425-435 Mln earlier led by increase in size and number of deals.

Polaris is persistently enhancing its product basket (specifically through IntellectTM) in almost all forms of banking and financial operations and has gained acceptance amongst leading financial institutions across the globe. At the Trailing market price of Rs 172, the stock is trading at 8.3X and 7.3X its FY 12E and FY 13E earnings which offers good upside potential in the Medium to Long-term. Moreover, the company is almost debt-free and carries a Cash chest of over Rs 400 Crore (Jun quarter) aiding further support to our valuations. We maintain our Rating and the target price of Rs 228 on the stock.

Buy Polaris Software; target of Rs 216

Polaris Software, revenues during the quarter went up by 2.9% qoq to Rs.450.2 crore. EBIDTA margins expanded by 80bps to 12.9% qoq despite rupee appreciation and wage rise. However,some of it was also contributed by one-off provision reversals (quantum not known). This quarter saw pressure on Net Profits which declined 22.6% qoq and 4.4% yoy at Rs.44.6 crores. This was due to desertion of tax benefits. The management has revised the USD guidance of revenue to $430mn-$440mn (from earlier $425mn-$435mn) and PAT guidance to Rs 218 crs-Rs 222 crs (from earlier Rs 215 crs-Rs 220 crs) and EPS guidance to Rs.21.95-Rs.22.15 (from earlier Rs.21.65-Rs.22.15). This revision is on the back of J.V with 2 of Bangladesh banks and RBI deal. In addition, it includes non-core property sale of Rs.10-15 crore.

Polaris bagged its biggest intellect deal of Rs.247 crs with RBI during the quarter. The management has guided for Intellect’s sales to contribute 26% of the total revenues in FY12E against 23% in FY11. Due to seasonality, Intellect’s revenues were lower during the quarter at Rs.98.4 crs against Rs.102 crs in the previous quarter. Identrust’s contribution was at Rs 6.8 crs during the quarter taking the total consolidated Intellect revenues to Rs.105.2crs.

Company has won some good deals in the recent past and the management has indicated upside in pricing from some of their clients. The key part would be managing margins considering their utilisations are already at the peak of 81%. At CMP Rs.168.64, the stock is trading at a 7.81x and 6.9x on FY12E and FY13E repectively. Considering the overall macro-economic factors like IT spending and Rupee movement, we give a 10 multiple to our FY12E EPS of Rs.21.58 and arrive at a price target price of Rs 216 (upside of 28%).

Buy Polaris Software; target Rs 234

Polaris Software Lab (Polaris)` performance for Q1FY2012 was broadly in line of our expectation with a sequential revenue growth of 4.1% to USD 100.7 million (our expectation was of USD 102 million). IT services revenues were up 4.1% quarter on quarter (QoQ) to USD 77.1 million. The product revenues reported a similar growth of 4% QoQ to USD 23.5 million, however excluding `IdenTrust` revenues of USD 1.5 million and system integration (SI) pass through revenues of USD 1 million (USD 3.4 million in Q4FY2011), the product revenues have in fact grown by 9.4% QoQ to USD 21 million. In INR terms, revenues were up 2.9% to Rs 4,502 million. The lower revenue growth in INR terms was on account of a lower US dollar realisation of Rs 44.7 as against Rs 45.2 in Q4FY2011.

On the other hand, the EBITDA margins surprised positively with a 90 basis points expansion on a sequential basis to 12.9% (ahead of our expectations of 11.1%) despite wage hikes affected during the quarter. The margin outperformance was driven by a rate hike in the IT services business coupled with a write back in bonus provisioning and lower SI pass through revenues during the quarter to the tune of USD 1 million as against USD 3.4 million in Q4FY2011. The margins in the product business improved by 200 basis points QoQ to 25% (excluding IdenTrust) while IT services margins expanded by 100 basis points QoQ to 11%. Including IdenTrust, the product business margins remained stable at 23%.

Other income was down QoQ by 54% to Rs 80 million as against Rs 174 million in Q4FY2011. The other income for the quarter includes profit on sale of real estate of Rs2 crore against Rs 96 million in the sequential quarter. The net profit was down 22.6% QoQ to Rs 446 million (in line with expectations) on account of a higher tax rate of 27.5% as compared to 13.4% in Q4FY2011.

`Intellect` funnel strong at USD 550 million:

For Q1FY2012, Intellect revenues fell 2.6% QoQ to USD 22 million. The management believes that this is a quarterly aberration and quarterly volatility would occur due to variation in license revenues and system integration pass through revenues (USD 1 million against USD 3.4 million in sequential quarters). However, the Intellect deals funnel is looking strong at USD 550 million and 11 new wins during the quarter including a USD 55 million deal from the Reserve Bank of India (RBI) are a testimonial to the growing acceptance of the Intellect product in the market place. The company has also entered two new markets - Bangladesh and Sri Lanka with key wins indicating its increasing presence. Polaris has strengthened its product offering through the launch of the Intellect Liquidity Risk Management (LRM) solution which enables banks and financial institutions worldwide to comply with the Basel III norms in terms of monitoring internal liquidity. Further, the company launched the cloud ready platform for the insurance sector.

Guidance for FY2012 raised:

Polaris` management has raised its revenue guidance for FY2012 to USD 435-440 million, a growth of 24.9 - 26.3%, up from its earlier guidance of USD 425-435 million (a growth of 22.0 - 24.9%). The company marginally increased its net profit guidance to Rs 2.18-2.22 billion. The increase in guidance is mainly on the back of its growing deal funnel. The deal sizes are also increasing with the company`s funnel having deals of size of USD 10 - 20 million. The total funnel for the company is currently about USD 550 million. The management believes that the winning of the RBI deal and the increasing deal sizes (the company won two deals of USD 10 million each) would put the company on a faster growth path in the coming years. The increasing deal sizes would also lead to improving margins in the product business.

Valuation & View:

Polaris continues to show strong operating performance and operating margins have surprised positively during the quarter. Going forward, the management has indicated at strong deals traction building up in the Intellect side of the business and also the ticket size is increasing with the recent USD 55 million deals from the RBI being a testimonial to the fact. On the other hand, the recent geographical expansion in Bangladesh and Sri Lanka coupled with new product launches in the risk management space would strengthen the product portfolio of the company. We continue to remain positive on Polaris and maintain our `Buy` rating on the stock with a target price of Rs 234.

Buy Polaris Software Lab; target of Rs 228

Polaris registered healthy Revenue performance in the March quarter as Income from Software Dev and BPM increased by around 25% YoY and 10% QoQ to Rs 438 Crore (Q4, 11). In Dollar Terms, the Revenue grew by 28% to $98 Mln (Q4, 11) from $76 Mln previous year. On a full year basis too growth remained steady and was higher than estimate at Rs 1586 Crore (FY 11) as compared to Rs 1354 Crore (FY 10). Software development services and products, which is the key business segment of the company expanded by18.7% to Rs 1570 Crore (FY 11) as against Rs 1322 Crore (FY 10).

Polaris bought 85% stake in US-based IdenTrust for $20 million (about Rs 90 crore) in an all cash deal. Through this initiative, the company made its foray into cloud computing space to offer financial technology solutions. Cloud computing is Internet based computing whereby shared resources, software & information are provided to computers and other devices on demand.

During the Mar quarter, Polaris recorded 16 fresh deals in its Intellect Suite that accounted for over 23% of the total quarterly revenue. Overall contribution from Intellect enhanced Rs 100 Crores in the quarter. Polaris signed 8 big deals in the quarter across verticals and geographies. The big ticket wins included a leading global bank which picked company's Intellect Liquidity for its Cash and Trade Management solutions. Intellect Liquidity was the solution of choice for two other leading banks in Europe. Insurance business saw 3 marquee deals in the quarter, from some of the largest players in Europe while Intellect Claims went live with one of the most reputed Life Insurance providers in India.

Polaris is systematically enhancing its product basket (specifically through IntellectTM) in almost all forms of banking and financial operations and has gained acceptance amongst leading financial institutions across the globe. At the Trailing market price of Rs 195, Polaris is trading at 9.6X and 9.2X its FY 11 and FY 12E earnings which is we feel is attractive. Moreover, the company is almost debt-free and carries a Cash chest of over Rs 500 Crore (Mar quarter) aiding further support to our valuations. We maintain our rating and target price of Rs 228 on the stock.

Buy Polaris Software; target Rs 240

Polaris reported stronger-than-expected quarter. The company reported top-line growth of 9.4% to Rs4.4bn (PLe: Rs 4.18 billion, Cons: Rs 4.21 billion) and growth of 8.5% QoQ in USD terms. Operating margin eroded by 106bps, due to higher travelling cost escalated by the crisis in Japan. Despite the lower margin, Polaris has beaten our/consensus EPS estimate, delivering growth of 15.6% QoQ to Rs 5.86 (PLe: Rs 5.12, Cons: Rs 5.40), driven by higher other income of Rs 230 million (Q3FY11: Rs 168 million).

Strength in Intellect continues: The strong growth was driven by the Intellect business (9.9% QoQ). According to the management, the strong demand outlook for Intellect would push 40% YoY growth from the product. We believe that strong growth for the product would help maintain margin in FY12.

Conference Call Highlights: 1) Excluding Japan and Middle East crisis, margin decline was 37bps 2) Rs 97 million of one-time other income from monetization of fixed asset 3) USD revenue to grow by 22-25% for FY12 4) FY12 tax rate -27% 5) 20 new clients added (16 for Intellect) 5) Sales funnel doubling from USD 300 million to USD 600 million 6) Wage hike in Q1FY12 (Offshore 12-14% Onsite 2-4%) 7) Net hiring in FY12 to be 2-2.5k 8) Utilization at 81% 9) Attrition (annualized) at 18% 10) Expects IT Services margin to be in 9-12% range.

Valuation and Recommendation: `Buy` with target price Rs 240: We believe that acceptability for Intellect suite is growing fast. We expect the company to deliver a stable margin, with mid-20s revenue growth. We reiterate our `Buy` rating. The stock is trading at 8.1x FY13e earnings, steep discount to peers.

Buy Polaris Software Lab; target of Rs 234

Polaris Software Lab (Polaris) has acquired an 85.3% strategic interest in Iden Trust Inc (IdenTrust) for USD 20 million in an all-cash deal. The deal has been closed at about 2x FY2012E revenues of USD 11 million. The acquisition would be margin dilutive in FY2012 but earnings accretive from FY2013 onwards. The deal would enable Polaris to host its products on the data centre of IdenTrust as well as mark its entry into the identity management space which is a key to cloud management.

We view this development as a long-term positive for Polaris as the acquisition of IdenTrust identity management system platform will enhance the product offering of the company and intensify the cross-selling opportunity for the company`s flagship product, Intellect. Further, the banking parentage of IdenTrust would also help Polaris get the required confidence to pitch for new customers. Finally, the access to offering cloud-based solutions and services would help Polaris in the coming years. However, our initial reading suggests the acquisition shall be earnings dilutive in FY2012. We will revisit our earnings estimates and incorporate the IdenTrust numbers in our FY2012 and FY2013 estimates after the earnings concall of the company. For now, we maintain our Buy rating on the stock with a price target of Rs 234.

Short Polaris Software April Future

Polaris Software Lab (on the daily candlestick chart), bearish pattern of Evening Doji Star is formed. It consists of an upward candlestick on the first day, followed by a smaller Doji candlestick that opens above the high of the previous candlestick and followed by a downward candlestick on Friday that opens below the low of the previous candlestick. The above pattern is more relevant when it occurs during a significant upward trend. Adding to it, on line chart stock has broken down after formation of multiple top pattern which is inherently considered as bearish pattern and could trigger sharp sell off in the counter in the near term. We advise going short on Polaris April Futures between Rs 204-205 with stop loss of Rs 208 for target of Rs 196.

Buy Polaris Software Lab; target of Rs 228

Polaris Software Lab has registered healthy Revenue performance in the quarter under review as Income from Software Dev and BPM increased by over 18% to Rs 400 crore (Q3, 11) as against Rs 339 crore (Q3, 10). In Dollar Terms, the Revenue grew by 23% YoY to USD 89 Million from USD 73 million.

Under the Software Dev division, Overseas which constitutes around 90% of the segments revenue rose by 16.6% to 352 crore while the Domestic revenue shot up by 44% to Rs 43 crore. Of the total revenue for the quarter, America contributed 44%, Europe 26%, IMEA 12% and Asia Pacific 18%.

We anticipate Polaris to maintain its firm financial and operating performance in the future wherein its Top-line is expected to rise at a CAGR of 18% by FY 12E to Rs 1837 crore as equated to Rs 1322 crore (FY 10). Healthy growth in Revenue with better management of operations is expected to increase the EBITDA by around 20% to Rs 281 crore (FY 12E) as compared to Rs 196 crore (FY 10). Meanwhile, flat Depreciation costs and almost nil interest expenses is expected to drive the Bottom-line at a CAGR of 22% to Rs 228 crore by FY 12E. On a fully diluted basis, the EPS is expected to jump to Rs 20.2 in FY 11E and further to Rs 22.8 in FY 12E.

Polaris is consistently enhancing its services basket (specifically through Intellect TM) to support almost all forms of banking and financial operations and its products are gaining acceptance amongst leading financial institutions across the globe. Backed by the strong product portfolio and considering the investment opportunity in the BFSI sector both domestically and internationally, the future for Polaris and Intellect TM's looks bright. At the Trailing market price of Rs 177, Polaris is trading at 8.7X and 7.8X its FY11E and FY12E EPS which is we feel is attractive. We maintain our Rating on the stock with a modified target price of Rs 228 (10X, FY12 EPS) in twelve months (Rs 206 Earlier).

Buy Polaris Soft; tgt of Rs 235

Polaris Software’s 3QFY11 revenue grew 3% qoq and 18% yoy (in rupees). Net profit increased 3.3% qoq. However, margin was hit by the rupee appreciation and employee additions. The company bagged 17 new deals in the products business in 3QFY11. Other income stood at Rs 53m and forex gain was Rs 115 million.

Geographically, Europe and ROW grew 11% and 25% respectively. Attrition stood at 20% in 3QFY11. Utilization was 78%, up 200bps qoq. Polaris saw net employee addition of 172 in 3QFY11. The product business contributes 23% to the total revenue; management is confident that this would reach 26-27% in next two quarters.

Polaris has cash and liquid assets of Rs 5.08 billion (Rs 51/share) vis-à-vis Rs 4.8 billion in 2QFY11. Debtor days stand at 44. We slightly trim our FY11e, FY12e and FY13e FDEPS 1.4%, 3.7% and 4.6% to account for margin pressure and increase in tax rates over FY12-13; our new FDEPS estimates are Rs 19.5, Rs 20.8 and Rs 25.6 respectively. We maintain Buy for a target price of Rs 235, which comprises Rs 200 for core earnings of Rs 17 (FY12e core EPS at 12x, maintained) and Rs 35 (valuing the cash above the average peer cash holding). Risks: slowdown in IT spends in the BFSI segment.

 

Buy Polaris Software Lab; target of Rs 230

Polaris Software Laboratories (Polaris) Q2 FY11 revenues from software products and services grew 7.7% QoQ to Rs 388.3 crore driven by double digit growth in services segment. Revenue was above our estimates. PAT increased 3.3% QoQ to Rs 48.2 crore in Q2 FY11 and was also above our estimates due to higher than expected revenues.” “Polaris’ revenues grew 7.7% QoQ in Q2 FY11 to Rs 388.3 crore driven by a doubledigit growth in revenues from services segment. Revenues from services segment grew around 10.2% QoQ to Rs 305 crore in Q2 FY11. Revenues from product declined marginally in Q2 FY11 to Rs 82.7 crore contributing 22.7% to the total revenues. The company reported EBITDA of Rs 60.2 crore in Q2 FY11 as compared to Rs 48.2 crore in Q1 Y11. Polaris reported net profit of Rs 48.2 crore in Q2 FY11 as compared to Rs 46.6 crore in Q1 FY11 representing a modest growth of 3.3% on QoQ basis. PAT margin declined due to forex loss. Polaris reported a forex loss of Rs 0.3 crore in Q2 FY11 as compared to a forex gain of Rs 8.8 crore in Q1 FY11. Company’s diluted EPS increased to Rs 4.82 in Q2 FY11 from Rs 4.66 in Q1 FY11.

Polaris is well hedged as compared to some of the peers as company has maintained strong hedging positions. At the end of Q2 FY11, Polaris has hedged USD 50 million for 2H FY11 at USD/INR rate of around Rs 48.33 while the exchange rate is currently hanging in the range of USR per INR 44-45. Further, company has hedged USD 74 million of its FY2012’s revenues at a rate of USD per INR of 48.31 and USD 74 million of its FY 2013’s revenues at a rate of USD per INR 49.42. This will partially mitigate the impact of appreciation of INR in FY 2011 and may result in foreign exchange gain in near term.

At the current price of Rs 172, Polaris is trading at a PE of 8.56x FY11 estimated EPS & 7.47x FY12 estimated EPS. The valuations look attractive at current levels given that some of the company’s peers are trading at significantly higher multiple. Based on our estimated EPS of Rs 23.02 for FY 2012 and a target PE multiple of 10.0x we arrive at a target price of Rs 230 per share for Polaris indicating a potential upside of 33.7% from current levels. Consequently, we reiterate our BUY rating on the stock with a long term view.

Buy Polaris; target of Rs 235

Polaris Software Lab overall revenue in 2QFY11 grew 7.7% qoq (rupee) and 5.9% (US dollar). Revenue from the products business was 21%. Consolidated net profit rose 3.3% qoq. Geographically, Europe and America grew 6% and 1% respectively, while RoW and India were down 6% and 1% respectively. Polaris’ order book is healthy, with 17 new deals in the products business. Q2FY11 revenue and net profit were in line with our estimates. Management has maintained FY11 EPS guidance of Rs 20.2-20.5, which is a growth of 31-33%. We expect about 12% volume growth, flat pricing, and a 50-bp margin expansion over FY12e. Polaris has cash and liquid assets of Rs 4.8 billion (Rs 47 per share). This reduced from Rs 5.3 billion in 1QFY11 owing to capex of Rs 400 million and dividend payout of Rs 200 million. Debtor days have slid to 44 from 47 earlier.

We maintain our target price of Rs 235 which comprises Rs 200 for core earnings of Rs 16.5 (target 12-month forward, Sep ’11 PE of 12x, maintained) and Rs 35 (valuing the cash above the average peer cash holding).

Buy Polaris Software Lab; target of Rs 188

Polaris on daily chart has given breakout from forming double bottom pattern with neckline persisting at Rs 177.Volumes have shown phenomenal increase surpassing its last three day average. Adding to its yesterday’s large white candle managed to close above 200 DMA signifying strength in the long term chart and is expected to remain strong in neat term. On the oscillator front RSI is corroborating uptrend with formation of higher tops and higher bottom. We advise buying stock in the range of Rs 176-178 with stop loss of Rs 174 for target of Rs 188.

Buy Polaris; target of Rs 250

Polaris Software Lab, intellect platform is well positioned to take advantage of the buoyancy in BFSI demand. Growth in licenses sales will provide the much needed non-linearity to the revenue and operating leverage. Our checks indicate that Polaris’ platform is on a solid footing after two years of investment. As recurring revenue picks up along with maintenance and licenses sales, we see EBITDA margins rising to mid teens (PLe FY11: 14.6%, FY12: 14.7%). With 21% of revenues coming from Intellect, which is growing faster than the company average, Polaris is the leading supplier of software to BFSI customers worldwide. Based on the company’s local and global service-focused approach in the entry-level/lower-end, mid-market SME segment, a very strong market position in several geographies and its large SME customer base, we believe Polaris has an overall strong position. Due to strong referral from some of the largest banks in the world, Polaris’ product caters to the wide needs of Banking, financial services and insurance sectors.

Our recommendation reflects an improved demand due to two factors: On the stronger side, we believe that Polaris’ product Intellect should perform well during a current macro environment due to lower cost componentization of products. It is clear that the risk of US macro impacting software demand has decreased materially over the last four quarters. Our target price is in line with the industry. This is notably still above the current stock price and top quartile of analyst’s recommendation. Buy Polaris with a target of Rs 250.

 

Buy Polaris Software Lab; target of Rs 235

Polaris Software Labs order book remains healthy, with 23 new deals won in the quarter, of which 16 were in the products business. PAT was in line with our estimate, aided by other income and forex gain. However, EBITDA margin dropped a whopping 320bp qoq in 1QFY11, on account of significant wage hikes. We reduce our target price to Rs 235 (from Rs 250); maintain buy

Buy Polaris Software; target of Rs 250

A review of the market opportunity areas and Polaris offerings and strengths indicates an overall positive outlook for the coming year, with a good mix from current geographic markets as well as new developing markets and business lines. Further, good cash and cash equivalents, efficient acquisition via internal accruals, minimal debt, expanding global presence via strong tie-ups, diversified product portfolio and strong client base including big clients like Axis bank, HDFC bank, ICICI Prudential, AIG and many big global players would fuel revenue growth going forward. In wake of such growth, Polaris Software Lab Ltd. seems to be extremely attractive investment opportunity. Presently, the stock is trading at Rs 180 which is at 13.55 times to its earnings and 2.29 times to its book value. Since the stock offers good opportunity, we initiate a BUY signal on the stock with a target price of Rs 250 in medium to long term investment horizon expecting an appreciation of about 40% from the current level of Rs 180

Buy Polaris; target of Rs 240

At the current market price of Rs 177 per share, Polaris is currently trading at a PE of 12.32x FY10E and 9.58x FY11E EPS estimates, which looks quite attractive. Based on our estimated EPS of Rs 18.48 for FY2011 and a target PE multiple of 13.0x we arrive at a target price of Rs 240 per share for Polaris. We recommend a BUY rating on the stock with a long term view,

Buy Polaris, target of Rs 228

In the last three years, on compounded basis Polaris has recorded decent growth in both the topline and bottomline with 15% CAGR growth, going forward we expect EPS CAGR of 31% over FY09-11E. At CMP of Rs 149, stock is quoting at 6.5x FY11E, incidentally ex-cash it is trading at 5x FY11E earning, which leaves ample room for further appreciation. We believe Polaris is strong candidate for bonus issue with a book value close to Rs 90 (last bonus issue 2001), on the other hand unlocking of real-estate value will bring added value to investors. We recommend a BUY with 12 months target Rs 228, at our target price stock will be valued at 10x FY11E.