DoW.Exclusive: Blue Star Infotech Ltd cmp260

Blue Star Infotech Ltd (BSIL) , part of Blue Star group, offers software solutions in Digital Transformation and Software Product Engineering with operations in USA, UK, Europe, Malaysia and Singapore. Company is focused on delivering valued-added and future-proofed software solutions by leveraging emerging technologies and trends while preswerving existing investments for gaining competitive advantages. BSIL caters to the IT and software R&D needs of enterprises globally and offers a broad spectrum of services ranging from Application Development and Management, Product engineering, Package Implementation and Testing to emerging areas such as Business Intelligence/Analytics, Mobility and Cloud Computing. Its technology labs for Mobility, Cloud Computing, Analytics and Usability engineering incubate and propagate new methodologies, standards, tools and solutions.

BSIL has been delivering consistently good financials:

For FY15, BSIL had reported revenue of 264.88 crores out of which exports (overseas revenues) were 235.45 crores. It means co is deriving nearly 90% of its revenues from overseas clients. Eps for FY15 stood at Rs 17.18.

For Q1/FY16, BSIL has achieved revenue of Rs 74.29 crores , growth of 15.2% YoY basis. However, PAT has flared up YoY 134% to 7.26 crores, translating into Eps of Rs 6.73. During the quarter, co has procured a big order worth Rs 96 crores and such steep rise in profits has been possible due to closing of unremunerative business, streamlining internal processes and result of past rationalisations.  BSIL can report Eps of Rs 24-26 for FY16.  Weakening rupees should enhance its earnings further as major revenues are from overseas clients.Stock is trading at just 12xFY16Eeps.

BREAKING NEWS:  It is reliably learnt that PROMOTERS HAVE DECIDED TO SELL THEIR ENTIRE 51% stake to a foreign co (name of buyer not being disclosed here) @ Rs 380 per share. Announcement in this regard can be expected in next 2-4 weeks. In recent weeks, we had provided ABSOLUTELY ACCURATE information on companies like Rain Industries, Jindal Poly, CIPLA etc.  Our Info/Breaking News on Blue Star Infotech should also turn out to be fairly accurate. 

In immediate short term, stock should rise to Rs 350-360. However, under new management of overseas buyers, BSIL can and should witness big increase in its revenues and profits in next 12-36 months. Investors may remember that how Kale Consultants  has delivered huge appreciation to its investors within 2-3 years of acquisition by foreign co. We estimate that similar transformation should happen with Blue Star Infotech also. Hence, if investors hold on to Blue Star Info for 2 years, stock may rise to Rs 750+

In this devastated market, sellers outnumber buyers and fear psychosis has gripped investors. However, our experience indicates that even in down market, if there is definite big corporate trigger/action/Breaking News on a particular stock, then such stock rises (even swiftly). Hence, we feel that depressed scenario offers an excellent opportunity to buy BSIL today at very attractive price which should provide decent appreciation in a very short period. Once, official announcement comes, stock will zoom to its fair price (in parity with open offer price)