Oracle Financial Services Ltd - Kotak

We find the stock richly valued. Any de-listing move from the Parent may trigger a price rise, though. Oracle's 4QFY12 numbers were below our estimates, both on the revenue and EBIDTA margin front.

Product revenues grew by about 7% YoY only. Within that, license fees fell by 20% YoY. We note that, product revenues are volatile in nature. The new license signings at $29mn ($10.5mn) was the silver lining. Services business continued to lose employees during the quarter. We fine-tune our FY13 earnings estimates on the back of the continued macro uncertainty. Our FY13E earnings stand at Rs.124 per share.

Our price target stands at Rs.2340 (Rs.2196) based on FY13E earnings. At our TP, the valuations will be similar to those of TCS. Looking at the potential downside, we downgrade the stock to REDUCE. However, there can be potential gains from Oracle's offer, if any, to buy-back shares and de-list the company. A sharp deterioration in user economies and a sharper-than expected rupee appreciation are key risks to our earnings estimates.

Source : Equity Bulls

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