Sharekhan puts buy on ADSL, target of 
532
Bangalore: Sharekhan has recommended a buy rating on Allied Digital Services (ADSL) with a target price of 
532 in its August 14, 2009 report. According to Sharekhan, investors with a two-year horizon can buy the shares of ADSL, given a healthy change in its business-mix towards services and synergies from acquisition of En Pointe Global Services. At 532, the stock of Allied Digital trades at eight times of its expected per share earnings for financial year (FY) 2009-10.
ADSL provides IT infrastructure management and technical support outsourcing services. It primarily acts as a support-partner for IT infrastructure products - desktops, laptops, servers, network software and routers. In its report Sharekhan stated, "We initiate coverage on ADSL with a 'Buy' recommendation and price target of 532 (at 6x FY2011 EV/EBITDA multiple). Our target price implies FY2011 PE multiple of 8.3x, which is at 30 percent discount to its average multiple of 11.6x since its listing in July 2007."
Since its listing, ADSL has witnessed healthy growth rates in both revenues as well as profits. For the FY 2008-09, the company saw its revenues grow by 90 percent to 565 crore, while net profits grew by 83 percent to 79.6 crore. In the first quarter of FY 2009-10, ADSL witnessed a 72 percent growth in revenues to 158.9 crore over the same period last year, while net profits grew by 44 percent to 22.7 crore.
The company has also witnessed a rapid change in its business-mix over the last couple of years. From having 70 percent of its revenues coming from hardware-intensive deals, ADSL now derives 55 percent of its revenues from services and the rest from delivering solutions that have huge hardware components.
In 2008, ADSL acquired 80.5 percent stake in En Pointe Global Solutions, a U.S.-based IT infrastructure management and remote management services provider for $30 million. Apart from strengthening its remote services offering, the acquisition helped the company to cross-sell to En Pointe's many clients.
532 in its August 14, 2009 report. According to Sharekhan, investors with a two-year horizon can buy the shares of ADSL, given a healthy change in its business-mix towards services and synergies from acquisition of En Pointe Global Services. At 532, the stock of Allied Digital trades at eight times of its expected per share earnings for financial year (FY) 2009-10.
ADSL provides IT infrastructure management and technical support outsourcing services. It primarily acts as a support-partner for IT infrastructure products - desktops, laptops, servers, network software and routers. In its report Sharekhan stated, "We initiate coverage on ADSL with a 'Buy' recommendation and price target of 532 (at 6x FY2011 EV/EBITDA multiple). Our target price implies FY2011 PE multiple of 8.3x, which is at 30 percent discount to its average multiple of 11.6x since its listing in July 2007."
Since its listing, ADSL has witnessed healthy growth rates in both revenues as well as profits. For the FY 2008-09, the company saw its revenues grow by 90 percent to 565 crore, while net profits grew by 83 percent to 79.6 crore. In the first quarter of FY 2009-10, ADSL witnessed a 72 percent growth in revenues to 158.9 crore over the same period last year, while net profits grew by 44 percent to 22.7 crore.
The company has also witnessed a rapid change in its business-mix over the last couple of years. From having 70 percent of its revenues coming from hardware-intensive deals, ADSL now derives 55 percent of its revenues from services and the rest from delivering solutions that have huge hardware components.
In 2008, ADSL acquired 80.5 percent stake in En Pointe Global Solutions, a U.S.-based IT infrastructure management and remote management services provider for $30 million. Apart from strengthening its remote services offering, the acquisition helped the company to cross-sell to En Pointe's many clients.