Polaris Consulting & Services: Buy at CMP and add on dips to Rs. 170-174 band
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Founded in 1993, Polaris Consulting & Services Ltd. (PCSL) is a global leader in Financial Technology (Fintech) for Banking, Insurance, and other Financial Services. Polaris is an expert in digital transformation, with over 25 years of experience and more than 300 clients across the globe. The company has the scale and intellectual capital to tackle programs of any size, yet approach small projects with the care and enthusiasm of a boutique firm. It has a presence in 30 geographies with team strength of over 8,500. Virtusa Corporation in March/April 2016 acquired a majority stake in PCSL.
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The acquisition of PCSL by Virtusa has opened up significant opportunities for the company. It can now offer end-to-end solutions in BFSI industry resulting in more clients, service offerings and digitization related projects. Post the acquisition PCSL has restructured its clients and eliminated low margin clients leading to effective utilization of its resources. Increasing trend of outsourcing in the financial industry and bright prospects in big data analytics industry would be key growth driver for PCSL in the near term. Virtusa may also go for delisting of PCSL which could result in a substantial jump in stock price.
We feel investors could buy the stock at the CMP and add on dips to Rs 170-174 band (7.5x FY19E EPS) for sequential targets of Rs. 241 (10.5x FY19E EPS) and Rs. 276 (12x FY19E EPS) in 2-3 quarters.
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