This smallcap IT software firm delivered 1,000% return in just 1 year

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Smallcap IT firm Intellect Design Arena has changed the fortune of investors despite the ongoing uncertainty over the Covid-19 pandemic during the past one year. Amid the ongoing rally in the broader market, shares of the company have climbed 1,024% to Rs 765.35 on May 28 from Rs 68 on the same day last year. That means, a Rs 1 lakh investment made in the stock last year would have become Rs 11.24 lakh at present.

Analysts are still gung-ho on the stock considering favourable industry tailwinds, strong deal win momentum and healthy deal pipeline.

Latest financial results The company recently posted 96.7% growth in consolidated net profit at Rs 80.61 crore in Q4 FY21 as against Rs 40.99 crore in Q4 FY20. Net sales increased 11% to Rs 397.57 crore in Q4 FY21 over Q4 FY20. Current tax outgo stood at Rs 14.81 crore in Q4 FY21 as against Rs 1.05 crore in Q4 FY20.

On the other hand, it reported a consolidated net profit of Rs 262.77 crore for the year ended 31 March 2021 compared with a net profit of Rs 15.99 crore recorded in the year ended 31 March 2020. Net sales increased 11.2% to Rs 1497.46 crore in FY21 over FY20.

Arun Jain, chairman and managing director, Intellect Design Arena, said: “Digital adoption not only accelerated this year but fundamentally altered the way technology impacts the business of banking and insurance. This was led by regulation, fintech, changing consumer preferences and Covid.”

Should you buy? Brokerage Sharekhan has a ‘Buy’ rating on Intellect Design Arena with a price target of Rs 900. It believes that the company’s revenue and earnings are expected to post a 16% and 27% CAGR, respectively, over FY2021-FY2023E, led by strong traction for products across segments, new product launches, deal pipeline, and margin expansion.

On the other hand, Anand Rathi Shares and Stock Brokers has set a target price of Rs 840 for the IT firm. “On three counts, Intellect delivered a strong FY21 performance: growth, profitability and cash generation. In FY22, it is looking to accelerate growth to mid-teens while heading further toward its 30% margin goal,” the brokerage said, adding a slower-than-expected growth in advanced markets is one of the risks for the company.

ICICI Securities revised the target price upward to Rs 875 (from Rs 640 earlier). “Improving deal wins in Intellect Global Consumer Banking (IGCB), Intellect Global Transaction Banking and iSEEC, increased penetration in the US and Europe market, digital-ready product portfolio, healthy pipeline, huge addressable and underpenetrated market and improved annuity revenues bode well for revenue growth.”