Datamatics global

Stock Opportunities
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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.

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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.

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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

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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.

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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

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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.

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

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

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

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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.

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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

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Anyone tracking Datamatics global still ? Any reviews or analysis ?

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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

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Analysis of DataMatics Global Services Limited.

1 Like
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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.

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Is anyone still tracking this company. I see this thread is inactive from a while.

This looks like a very interesting candidate for re-rating. Penetrating in AI and margins expanding in this space reflecting in the Q4 FY 23 results. I’m not an IT expert, but the areas in which the company is focussing seems very interesting. Surely a company to be on the watchlist.

Will be great if any experts in this space can give their views.

Disclosure: Have initiated a position recently.

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- 300+ clients worldwide, added 21 clients in Q4FY23. Signed total contracts of 20 million in the Q4 FY23.
- Attrition rate at 24.8%.
- Digital Operations: 45% of total revenue from 41% in last quarter. EBIT Margin of 23%. Industry-vertical-oriented operations and enterprise back-office operations segments are expected to witness the highest volume of new work in next 5 years. Finance & Accounting Operations are expected to grow at 9-10% CAGR over the next couple of years.
- Digital Experiences: 14% of total revenue. EBIT Margin of 28.2%.
- Digital Technologies: 41% of total revenue from 43% in last quarter. EBIT Margin of 9.1%. Turned profit making in Q3 FY23. Growing traction from more IT spending & Intelligent Process Automation. Shift to growth of cloud over on premises.
- Change in revenue mix led to better margin overall. The expansion of margins can be attributed to strong revenue growth, cost optimizations, reduced attrition and revenue conversions at higher price.
- ROE/ROCE at 21.4%/20%.
- D/E at 0.
- Total Cash and Investment (Net of Debt) increased from 428 in FY22 to 498 cr in FY23.
- Guidance: Full scale impact of price hike can be expected in FY24 which will help to maintain a stable and healthy margin profile. Price hikes of 5-30% have been taken. Supply side challenges are seen easing which help in maintaining margins same as this year. They have a healthy pipeline and will grow on the base of new customer acquisition. Headwinds seen in demand from US and Europe. Revenue growth in FY24 expected to be 14-15%. Same kind of deal wins expected in FY24.
- Targeted Acquisitions: Have initiated dialogues with several customers or prospects target companies. Looking to make acquisitions worth 20-50 million in FY24.
- Brokerage Choice is giving a revenue target of 1750 cr for FY24 and EPS of 37.2 for Target price of 447 (already achieved).
4 Likes
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A Stock that gave me 100% Return!

The most talked about sector since Covid is the IT Sector. Since 2020, there was a constant up move in the IT sector until January, 2022 (Tracking the Nifty IT index). After that, there was a correction in the IT sector until June, 2022. Since then, the Index has been in the sideways trend until today.

This 6 months correction given by the Index from January, 2022 to June, 2022 led me to look at the IT space more in detail. My interest was more towards the Midcap/Small cap/Microcap IT space rather than the Largecap IT space.

Going through the listed companies, I found a company named Datamatics Global Services. Datamatics Global Services Ltd is a global provider of Information Technology (IT), Business Process Management (BPM) and Consulting services. The Company provides business aligned next-generation solutions to a wide range of industry verticals that help enterprises across the world overcome their business challenges and achieve operational efficiencies.

The company has been listed since 2005 at Rs. 220. In 2020, the stock made a low of Rs. 27. Since then, the stock had soared to Rs. 300 until August, 2021. It came onto my watch list in December, 2021. I started observing the price movement and quarterly numbers. I entered the stock in February, 2022 around Rs. 300. Since then the stock has been not been performing price wise. There was growth in revenue as well as profitability in the quarterly results but still the price was not giving an upward move. It was still in the sideways trend on a monthly basis.

And then in April 2023, when the company declared a great result quarterly as well as yearly (as shown below), it gave a great upward move from Rs. 300 to Rs. 610 in June, 2023.

I held onto the stock since February, 2022 and holding till date.

They have given great guidance over FY24 numbers which is as follows:

ĂĽ Full scale impact of price hike can be expected in FY24 which will help to maintain a stable and healthy margin profile. Price hikes of 5-30% have been taken. Supply side challenges are seen easing which help in maintaining margins same as this year. They have a healthy pipeline and will grow on the base of new customer acquisition. Headwinds seen in demand from US and Europe. Revenue growth in FY24 expected to be 14-15%. Same kind of deal wins expected in FY24.

ĂĽ Targeted Acquisitions: Have initiated dialogues with several customers or prospects target companies. Looking to make acquisitions worth 20-50 million in FY24.

ĂĽ Change in revenue mix led to better margin overall. The expansion of margins can be attributed to strong revenue growth, cost optimizations, reduced attrition and revenue conversions at higher price.

Let’s hope that the Quarterly Numbers continue to perform well and this company eventually becomes a Midcap/Large Cap company over the ultra-long term Investment Horizon.

This is not a recommendation to buy whatsoever.

The stock is currently at Rs. 575 and still I see a better future for the stock.

Happy Investing!!!

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3 Likes
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Any reason why today 20% down… I searched in google… no info found… any news that we should know…

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DATAMATICS Clarification of Rumor: The Company would like to clarify on the rumors in the market regarding the termination/cancellation of a big partnership in the US. These rumors are false and baseless and merely public speculations.

1 Like