Mehabe score: 2 G Factor: 0 Piotski Score: 7 The stock has a rating OBSERVE & HOLD. The mehabe team score is reflective of its fundamental and technical merits. A rating above 8 is considered good buy. The stock has a G-Factor of 0 and Piotski score of 7.
Description
Tera Software Ltd., headquartered in Hyderabad, started its operations in 1994. Co. implements the Digital Projects as E-governance, System Integration, and building IT and non-IT infrastructure for Optical Fibre Cable and Broadband services. The co. has executed BOOT projects (build, own, operate, transfer) spread over 3-10 years across 22 states of India and has over 3000 outlets across India. ##Site:TERASOFT
Market Cap:
Rs 68.1 cr
Price:
54.4
Trading pe:
52.8x
Book-value:
86.1/share
Div yield:
0.00 %
Earning yield:
11.38%
Face-value:
10.0/share
52week high:
72.50
52week low:
18.05
Technical Analysis
Stock trades at 54.4, above its 50dma 43.24. It also trades above its 200dma 38.46. The stock remains bullish on techicals
The 52 week high is at 72.50 and the 52week low is at 18.05
Price Chart
P/E Chart
Sales and Margin
Strengths
– Stock is trading at 0.63 times its book value
Weakness
– Though the company is reporting repeated profits, it is not paying out dividend
– has low interest coverage ratio.
– has a low return on equity of 3.87% for last 3 years.
-Contingent liabilities of Rs.116.61 Cr.
-Earnings include an other income of Rs.3.35 Cr.
– has high debtors of 228.42 days.
-‘s cost of borrowing seems high
Competition
– The industry trades at a mean P/E of 32.7x. Happiest Minds trades at the industry’s max P/E of 85.25x. TERASOFT trades at a P/E of 52.8x
– Industry’s mean G-Factor is 3.4 while the mean Piotski score is 9.0. TERASOFT has a G-Factor of 0 and Piotski scoreof 7.
– Average 1 month return for industry is 11.0%. The max 1- month return was given by Tera Software: a return of 33.83 %
Quarterly Results
Sales for period ended Mar 2021 is Rs 49.69 cr compared to Rs 92.25 cr for period ended Mar 2020, a fall of 46.1%
Operating Profits reported at Rs 4.07 cr for period ended Mar 2021 vis-vis 5.02 for period ended Mar 2020 .
Operating Margins expanded 274.9 bps for period ended Mar 2021 vis-vis Mar 2020 .
The EPS for Mar 2021 was Rs 1.37 compared to Rs 0.19 for previous quarter ended Dec 2020 and Rs 1.73 for Mar 2020
Profit & Loss Statement
Profit&Loss Comments
Company reported sales of Rs 161.0 cr for period ended Mar 2021 vis-vis sales of Rs 269.0 cr for the period ended Mar 2020, a fall of 67.1%. The 3 year sales cagr stood at 3.3%.
Operating margins shrank to 5.0% for period ended Mar 2021 vis-vis 6.0% for period ended Mar 2020, contraction of 100.0 bps.
Net Profit reported at Rs 1.0 cr for period ended Mar 2021 vis-vis sales of Rs 7.0 cr for the period ended Mar 2020, falling 600.0%.
Company reported a poor Net Profit CAGR of -20.6% over the last 3 years
Balance Sheet Statement
Cash Flow Statement
Cash Flow comments
Sales Growth
Profit Growth Statement
Profit Growth Statement
Stock Price CAGR
Return of Equity
General Comments
– The company has had stable/constant Return on Equity (RoE) metric. The RoE on Last Year basis was 6.0% compared to 4.0% over the last 3 Years. – The stock has given a return of 137% on a 1 Year basis vis-vis a return of 10% over the last 3 Years. – The compounded sales growth on a TTM bassis is -29% vis-vis a compounded sales growth of -0% over the last 3 Years. – The compounded profit growth on a TTM basis is -81% vis-vis a compounded profit growth of -15% over the last 3 Years.
Ratios
Shareholding Pattern
– Public shareholding has remained largely constant. The Mar 2021 public holding stood at 52.46% vis-vis 52.44% for Dec 2020
Conclusion
– Stock is trading at 0.63 times its book value – Though the company is reporting repeated profits, it is not paying out dividend
– has low interest coverage ratio.
– has a low return on equity of 3.87% for last 3 years.
-Contingent liabilities of Rs.116.61 Cr.
-Earnings include an other income of Rs.3.35 Cr.
– has high debtors of 228.42 days.
-‘s cost of borrowing seems high
Fundamentally, the stock remains weak on business fundamentals. Weak near term results have dampened and questioned business drivers. We suggest to wait for a upturn in business performance.
Technically, the stock trades above its 50 DMA 43.24 and is trading at 54.4 It has shown near term bullish momentum contrary to business fundamentals. We suggest to observe price action. However as investors, who like to avoid timing the markets, we suggest to avoid the stock
