Accumulate Nucleus Software Exports Limited - Motilal Oswal

(NCS IN; Mkt Cap USD 82m, CMP Rs 115, Accumulate)

Total income grew by 2.3%/0.19% yoy/qoq and net profit grew by -16%/-13% yoy/qoq, because of decline in OPM margin by 100 bps yoy, which happened due to mid term salary hikes and increasing sales and marketing spend.Product revenues grew by 1%/29% qoq/yoy & services revenue grew by -39%/-11% yoy/qoq.

Services order book grew by 2.5x qoq to Rs.125 crore due to a 10 yr service deal, product order book declined 8% qoq.

The pipeline for larger deals gaining traction in Europe and Japan.

There is continued strengthening of sales and marketing team, which increased to 126 from 113 qoq.

Cash and cash equivalents rose to Rs.195 crore (Rs.60 per share) from Rs.181 crore qoq. The company plans to utilize high cash balance to make a suitable acquisition.

Tax rates likely to increase to 25% in FY12E because of sunset clause on STPI setting in.

Rapid appreciation in forex rates along with high attrition for mid cap companies remain the biggest concern in the stock.

Source : Equity Bulls

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