scorecardresearchDown 75% from its record high, KR Choksey sees a massive 82% upside in

Down 75% from its record high, KR Choksey sees a massive 82% upside in this software stock

Updated: 24 Feb 2023, 10:52 AM IST
TL;DR.

The brokerage has a buy call on the stock with a target price of 28. We now value the company on a Price/Sales multiple of 3x on FY24E sales. This yields a target price of INR 28 giving an upside potential of 82.4 percent from the CMP. Accordingly, we maintain our “BUY” rating on the shares of Infibeam Avenues, it said.

The brokerage has a buy call on the stock with a target price of  <span class='webrupee'>₹</span>28.

The brokerage has a buy call on the stock with a target price of 28.

After falling 75 percent from its record high, domestic brokerage house KR Choksey sees a massive 82 percent upside in software stock Infibeam Avenues in the next 12 months.

The brokerage has a buy call on the stock with a target price of 28. "We now value the company on a Price/Sales multiple of 3x on FY24E sales. This yields a target price of INR 28 giving an upside potential of 82.4 percent from the CMP. Accordingly, we maintain our “BUY” rating on the shares of Infibeam Avenues," it said.

Infibeam Avenues is a financial technology company that offers digital payment solutions and enterprise software platforms to businesses and governments across industry verticals under the brand names CCAvenue and BuildaBazaar.

It provides payment options to the merchants allowing them to accept payments through Websites and mobile devices in over 27 international currencies. It offers catalog management, real-time price comparison and demand aggregation features. Its digital payments portfolio consists of payment acquiring, payment issuance and domestic, and international remittances.

Earnings highlights

Infibeam Avenues reported a 46 percent increase in consolidated net profit to 35 crore in the third quarter that ended December 31, 2022, versus 24 crore a year ago. Its consolidated income from operations of the company grew by 4.4 percent to 414.7 crore during the reported quarter as against 39.7 crore in the December quarter of FY22.

“The Company had a solid quarterly performance attributable to all-round business development. Our focus on generating higher profitability per transaction in our payments business is starting to show results,” Infibeam Avenues Managing Director Vishal Mehta said in a statement.

The brokerage believes that volume growth for the firm will be driven by a robust growth outlook in the Indian payment industry, an increase in orders in the Government e-Marketplace (GeM) Portal and a rise in volume from the international market.

Moreover, the company is optimistic about the growth in volume from Tap Pay, where it anticipates onboarding up to 0.1 mn and 1 mn merchants by FY23 and FY24 respectively, further noted the brokerage.

Net take rate (NTR) is also expected to grow by double digits ex-GEM due to increased revenue share from a high take rate an international business, volume ramping from offline mode via TapPay, and a focus on growing volume from high margin sectors, it added.

Recent developments

The brokerage informed that Infibeam has deployed around 15,000 terminals with the CC Avenue TapPay solution in India. The company targets to reach 0.1mn by the end of FY23 and 1mn by FY24. During the quarter, the Go Payment business turned EBITDA positive within 4 years of operation, and the company has raised its stake in the Go Payment platform to 54.80 percent from 52.38 percent earlier. Infibeam has also commenced operations in Saudi Arabia during the quarter. Besides this, the company is looking to launch products such as working capital financing and invoice discounting under the Trust Avenue platform and plans to add express settlement later, it mentioned.

Valuation

"Infibeam has been reporting very robust growth in transaction processing volume (TPV), gross take rates (GTRs), and NTRs on the back of strong demand and favorable payments mix. With additional growth drivers like i) consistently converting EBITDA into free cash, ii) debt-free company and iii) a major capex cycle behind, Infibeam is charting a focused growth strategy for the next 3-5 years," said MOSL.

Its new businesses are expected to drive gross margins over the long term once it reaches scale, it added. Infibeam is trading at 2.5x/1.8x its FY23E/FY24E Price/Sales (P/S) multiples, respectively. It is similarly trading at P/E multiples of 39.7x/27.2x on its FY23E/FY24E earnings.

The brokerage has a revenue CAGR of 31.5 percent between FY22-24E and a PAT CAGR of 34.7 percent for the firm for the same period.

Stock price trend

The stock has eroded 75 percent of its investor wealth since hitting its record high of 61 in September 2018. It has also fallen 21 percent in the last 1 year and 4 percent just in Feb.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.

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Infibeam stock price trend
First Published: 24 Feb 2023, 10:52 AM IST