Reduce Oracle Financial Services - Kotak

We find the stock richly valued. Any de-listing move from the Parent may trigger a further price rise, though.

The management maintains that, the uncertain macro scene is keeping clients cautious and has had an impact on the decision making / sales cycle. This was reflected in the relatively lower license bookings in 2Q. The pipeline is encouraging, though. Geographically, the company is seeing potential in smaller but potentially high growth economies. 2QFY13 numbers were also below estimates. The new license signings were at $8.3mn ($19mn in 1Q and $29mn in 4QFY12), which was disappointing. Our FY13 and FY14 earnings estimates stand at Rs.123 per share and Rs.135 per share (impacted by rupee assumptions). Our price target stands at Rs.2662 based on FY14E earnings.

At our TP, the valuations will be similar to those accorded by us to TCS. Looking at the potential downside, we maintain REDUCE. However, there can be potential gains from Oracle's offer, if any, to buy-back shares and de-list the company. A delayed recovery / 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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