Recommendation from Software Sector

This section gives a recommendation of a stock having stock price below Rs 150 with sound fundamentals and expected to give handsome returns over a one-year time horizon.

INTENSE TECHNOLOGIES : CHARTING AN ‘INTELLIGENT’ GROWTH CURVE

HERE IS WHY
✓ Huge scope offered by the IT sector
✓ Successful in retaining talent
✓ Focus on diversification of revenue streams

The IT and BPM sector has significantly contributed to India’s GDP and public welfare, accounting for 7.5 per cent of the country’s GDP in FY23 and is expected to contribute 10 per cent by 2025. India is now preparing for the next phase of its IT revolution, with 76 crore citizens having access to the internet. In fact, India is one of the countries with the quickest pace of digital adoption, achieved through government action, commercial innovation, investment, and new digital applications.

This positive impact on citizens’ daily lives is expected to continue. The software product industry is predicted to reach USD 100 billion by 2025. Owing to this, our low-price scrip recommendation for this issue is Intense Technologies Ltd., which is a publicly owned enterprise software company based in Hyderabad. It offers enterprise agility through intelligent enterprise customer communication management, intelligent enterprise information management, and intelligent enterprise content management suites.

The company focuses on attracting and retaining talent in solutions architecture, software development, technical support and marketing. Their suites are SOA- driven, highly scalable, and require no additional investments. The flagship offering, the iECCM Suite, is used by over 75 per cent of India’s telecom operators for enterprise-wide customer communications. In Q1FY25, on a consolidated basis, the revenue of the company increased by 66.77 per cent YoY to ₹39.36 crore as compared to ₹23.6 crore from the previous year’s same quarter.

On a sequential basis, the revenue increased by 26.38 per cent. The PBIDT excluding other income increased by 79.13 per cent to ₹7.62 crore YoY as compared to ₹4.26 crore from the previous year’s same quarter, while sequentially increasing by 99.95 per cent. The net profit stood at ₹5.5 crore compared to ₹3.18 crore, a YoY increase of 73.1 per cent, while sequentially increasing by 83.19 per cent from ₹3 crore.

The company’s ‘Project Butterfly’ launched 1.5 years ago, aims to diversify revenue streams and streamline operations, focusing on managed services and operational efficiency to improve margins. The company has a strong presence in BFSI, telecom and government sectors, serving three of the top five banks and seven of the top 10 insurance companies in India. It has recently penetrated the Americas market with two new contracts. The company is transitioning towards a transactionalbased revenue model, aiming to maintain a 25 per cent EBITDA margin.

It is investing in technology, such as AI and blockchain, to enhance the existing platforms and improve operational efficiencies. The company is recognised as a key player in the communications space by analysts like Gartner and Omdia.

By transitioning towards providing comprehensive, end-to-end solutions, the company aims to deliver greater value to customers and differentiate itself in a competitive landscape. At TTM, Intense Technologies is trading at a PE of 19.1 times, which is higher than its three-year median PE of 9.1 times and lower than the industry PE of 40.7 times. The company has maintained a three-year ROE and ROCE of 15.7 per cent and 20.6 per cent, respectively. It has a three-year compounded sales growth of 17 per cent. Considering all these factors, we recommend BUY.