Datamatics global

Datamatics Global Services is a company founded by Dr. Lalit S. Kanodia, an indian IT industry pioneer with a Doctorate from MIT, USA. Datamatics helps large global companies in managing their end-to-end application life cycle and business processes. Their next generation solutions span Document management, Portal management, Publishing solutions, Data warehousing & analytics and several others. For more info check, http://www.datamatics.com

Datamatics client footprint is spread across all four major continents, Americas, Asia, Europe and Australia. The company is a trusted partner to many Fortune 500 companies and help them power their business process automation by creating next generation solutions.

PRESENT DAY NUMBERS

CMP on Day27 Aug2014: Rs 56.30 Market cap: 350 crores BV: 59 FV: 5

Revenue FY14: 733 cr (FY13 550 cr) Net profit FY14: 48 cr (FY13 26 cr) EPS: 8.2 (FY13: 4.4)

Debt: 80 cr (on consolidated basis) Current assets and cash balances: 160 cr (approx)

BRIEF HISTORY

Datamatics was one of the early companies in the indian IT industry. The company was founded in the year 1975. This was the first indian IT company to win “International Asia Pacific Quality Award” in the services category in the year 2007. Over the last 2 - 3 decades the company has won several awards and recognition in areas such as Quality, Corporate governance, HR, Job creation, etc

MULTIBAGGER POTENTIAL

1). Revenues of Datamatics grew by 24% in FY 2013; significantly higher than 10.2% growth of the overall industry

2). Remarkable achievement in the growth of the acquired company Cignex

3). Cignex revenues grew from 99 cr to 193 cr in the 2 years after acquisition

4). Datamatics has maintained an excellent and consistent profit growth during the last 4 years.

5). The company’s reserves (excluding revaluation reserves) as per balance sheet increased from 268 cr in FY13 to 306 cr in FY14

6). Except for 2-3 years, the dividend payout ratio has been in the range of 40% over the last 10 years

INTERESTING INFO

1). Datamatics Global Services was voted as India’s “Most respected software company in corporate governance” at the 5th Annual India leadership conclave & India affairs Business leadership awards.

2). The company has delivery centers in 7 cities; Ahmedabad, Mumbai, Nashik, Delhi, Bangalore, Chennai and Puducherry

3). The company has overseas subsidiaries in Germany, USA, UK, Australia, Switzerland, Mauritius and Singapore

4). The export revenue of the company is 86%

5). Prior to founding Datamatics in 1975, Dr. Kanodia was one of the persons instrumental in setting up TCS in 1967

MY TAKE

From an investment perspective, Datamatics ticks all the boxes. It is a fine IT company; superb track record, consistently profit making, excellent promoter pedigree, financially stable, wide range of clients, management execution capability and more than anything; deeply deeply undervalued.

**A million rupee question? Why on earth is this stock available so cheap? **Market cap of 350 cr.

This is a question to which I have no answer. Mr Market has missed out on this one(thus far).

A company with 700+ cr annual revenue, 48 cr net profit, current assets worth 160 cr, dividend paying; solid, stable and robust in every which way. I am reasonably sure that this stock cannot continue to be ignored for ever.

Hi Pranab,

Has the management given any guidance for FY15 (like how much Sales, margins or PAT growth is expected)?

Btw, its not very cheap imo. ROE is arnd 9% (same as a fix deposit return), so price to book value ~1 is fair i guess. P/E of 7-8 for 350cr market-cap company is probably fair too. Yes, sales to market-cap ratio is quite low.

Dear Vicky,

If everything was perfect with Datamatics, then it would not be available in the 50 - 60 rs range and would be trading at a minimum of 200 - 250 rs range.

My whole objective is to find companies/stocks that are “not so great” currently, how ever have “tremendous potential” for the future.

In such circumstances if you buy the stock when it is cheap (like Datamatics is right now); there will be potential of making 200 - 400% profits by the time things start looking good (and market recognizes the same).I am not at all interesting in making 20, 30 or 50% profit on my investment.If we do what everyone does (or think like everyone else); we will get the same results. Think about it.

I am not really sure how u say that PB of 1 and PE of 7-8 is fair. Here is what I suggest you to do:

Keep this stock in your radar. Look at the share price after 4 - 6 quarters. You will get a practical example how how multibagger stocks work.

Look at the FY13 annual report. The company has articulated how much better it has done than the Nasscom guidance. I do not remember the exact percentage. But Datamatics definitely bettered the Nasscom growth.

And the management was quite confident that they could beat the Nasscom guidance in the future. And I have no reason to believe that it is not possible.Datamatics is s high potential multibagger. Currently levels are fantastic for accumulation. The stock could be hugely rewarding with multibagging profits.

Kind regards,

Pranab

I am honestly very impressed by your foresight Pranab. Looks like the stock reached 80+ from 50-60 levels just within 1 week of your posting! Thanks for the insight.

Disc: Not invested.

Right Sarthak whether it’s incidence or what but stock zoomed +40% in week after creating this thread.

Positives

I had got chance to see Signex Ahmedabad earlier and was impressed by their quality offering in open space domain. Some of the technology has immense potential like Hadoop for Bigdata management.

ROE is low but it’s in expansion mode now. Already double digit now.

OPM is expanding since last 4 years, currently 19.2

Concerns

I couldn’t find why Tax ratio is low ! Does it get benefit of tax bracket ?

After recent sharp run up, it’s not cheap anymore.

Here I agree with Pranab to keep this stock in watchlist and observe some qtrs.

Kunal
Disc : Not invested, in digging/observe mode

Yes. It was a very good stock that pranab spotted. Read the fy14 annual report which say the company will look to cross 1000cr in sales for fy15.

Sales target looks over estimated by management. TTM Sales is 202 Cr.

In anytime 1000 cr sales turnover achievement is heavily rewarded by Market.

Thats standalone revenue. Consolidated TTM revenue is ~780cr.

That’s right. Consolidated TTM is 794 Cr.

Topline and bottomline growth is fabulous.

Kunal

Sales target looks over estimated by management. TTM Sales is 202 Cr.

In anytime 1000 cr sales turnover achievement is heavily rewarded by Market.

Hi all, it’s time to bump up this thread.

  1. Datamatics appears to be one of the few Indian IT companies which is working in the field of AI and is good at it
  2. Priced significantly cheaper than the bigger players
  3. In the long run, companies adopting to newer tech quickly will serve better in the IT sector which is not true for the big players IMHO
  4. Price has already jumped a lot

Disc: Not invested, booked short term gains

Anyone tracking Datamatics global still ? Any reviews or analysis ?

Anyone tracking this company. It is going through a restructuring and I wasn’t really sure but this article was interesting. Seems to cover some past acquisitions by the company as well.

Datamatics demerges e-Retail & Digital publishing services

Analysis of DataMatics Global Services Limited.

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Did someone attend the Earnings call that happened on 28th May?
Particularly interested in how management handled dividend or buyback questions that participants must have asked.