Margins Likely To Improve

Hyderabad-based Infotech Enterprises has grown its revenues at a compounded annual growth rate (CAGR) of 30 per cent over the last five years, a growth rate that many companies would kill for. In garnering this growth rate, Infotech has not taken on huge amounts of debt: in fact, it is still debt free. And to top it all, this mid-cap IT player is available at an attractive valuation. Strengths and Opportunities Strong revenue growth: Riding on both organic and inorganic growth, Infotech Enterprises managed to notch up a revenue of Rs313.82 crore in Q3FY11. This amounted to a robust growth rate of 31.3 per cent year-on-year (y-o-y) and 6.2 per cent quarter-on-quarter (q-o-q). The company has two main verticals: Engineering, Manufacturing and Industrial Products (EMI) which brings in 67.5 per cent of revenues, and Network Communication Engineering (NCE) which brings in 32.6 per cent. Both these verticals are doing well. EMI reported revenue growth of 3.2 per cent q-o-q at Rs211.9 crore. NCE grew 13.3 per cent q-o-q to Rs102.1 crore. EMI reported volume growth of 5.2 per cent q-o-q while that of NCE came in at a higher 14.1 per cent (this high number was made possible by Wellsco’s consolidation). Excluding the Wellsco effect, the NCE division reported a more sedate organic volume growth of 6.5 per cent. Improved margins expected ahead: With macro-economic conditions improving, Infotech has managed to secu

This article was originally published on May 06, 2011.