SANKHYA INFOTECH LTD: IT Co with likely play of Defense and Aerospace

Hyderabad based Sankhya Infotech Ltd, a small software company may witness HUGE UPSURGE in its business in coming years due to strong emphasis of Modi govt on Make In India, domestic production of Defense equipment and growing clout of Aerospace in India. It is major challenge to provide high value, result oriented and immersive

training solutions for Aerospace and Defense industry. SIL designs training solutions that are customer driven. 

Its solutions are used by many Aviation schools and Aerospace companies.

SIL offers several innovative products and services for Aerospace and Defense industry. SIL is catering to following segments:

DEFENSE

AEROSPACE

BFSI

TRANSPORT

ENERGY

HIGHER EDUCATION

SIL is world's FIRST company which offered remote training facility for any airlines in the world.

SIL has partnered with various Defense PSUs and Defense Labs . And its solutions of advanced training programs suitable for ALL 3 arms of defense forces i.e. Army, Airforce and Navy.

BIG DEVELOPMENT:  One American defense Contractor has tied up with SIL to integrate SIL's solutions with their own solutions.

For Aeropace industry, SIL offers following solutions:

TMIS

LMS

LCMS

Crew Rostering

Desktop Simulations

For Defense industry, SIL offers the following:

TMIS Defense

LMS

Simulators

Video integration

SIL's other portals of BFSI, Higher education are also doing well. However, SIL expects HUGE HUGE growth in its size from Aerospace and Defense segment.

FINANCIALS:

                      H1 ended Sept 15      FY15

                         Rs/Cr                       Rs/Cr

Revenue             74.68                     181.97

PAT                      3.12                        1.46

Equity                 11.24

EPS Rs                2.78                        1.31

BOOK VALUE Rs   65

For FY15, SIL had earned PBT of Rs 5.27 crores. However, apart from current income tax, Company had provided 2.68 crores for deferred tax and earlier period tax. But for this one-time provision, PAT would have been 4+crores

RATIONALE FOR RECOMMENDATION:

1. Current market cap is Rs 46 crores which is 0.39xRevenue. For a software co, such valuations are really low

2. Book Value is Rs 65. Stock is trading at 0.70xBValue

3. For FY16, SIL may report Eps of Rs 7. Stock is available at PERatio of 6 at current market price of Rs 41.25

4. For FY17, SIL will report substantially improved nos and Eps for FY17 will be Rs10+

5. Finally, SIL will be one of beneficiaries from govt's thrust on MAKE IN INDIA for Defense and Aerospace.

Barring unforeseen circumstances, investors may witness huge growth in SIL's business in next 2-5 years.

We feel that stock of SIL is grossly undervalued. If markets do not crash and remain stable/bullish,share price of SIL can go up by 50% in next 2-3 months. If investors have patience to hold SIL for 2-5 years, stock should provide REAL MULTIBAGGER wealth enhancement