Orient Technologies Ltd - Can be an immediate investing opportunity
A Comprehensive Analysis
Orient Technologies is a leading IT solutions provider caters to a diverse clientele across sectors such as BFSI, government, IT, healthcare, and media, with a strong focus on the Indian mid-market.
Business Segments
IT Infrastructure: Orient Technologies provides a comprehensive range of solutions, including Data Centre Solutions, End-User Computing, and Security Solutions. These services are tailored to meet the complex infrastructure requirements of various industries.
IT Enabled Services: The IteS division focuses on enhancing operational efficiency by offering Managed Services, Multi-Vendor Support Services, IT Facility Management, Network Operations Centre Services, and Security Services.
Cloud and Data Management Services: This segment emphasizes migrating workloads from data centers to the cloud. It includes data analytics, robotic process automation, supported by partnerships with leading technology companies.
Clients Base of the company
Recent Developments
Strategic Partnerships: Orient has secured multiyear technology services deals with institutions such as Coal India, SIDBI, NEML, and BECIL. Additionally, it has been empaneled by the PSB Alliance, a consortium of 12 public sector banks, to provide cloud services, a significant milestone in the domain.
Leadership Changes: The appointment of Mr Shrihari Bhat as CEO, represents a strategic pivot towards enhancing operational resilience and expanding the company’s competitive edge.
Financial Performance
Orient Technologies has reported the following financial results for the FY 2023 - 24:
Total Revenue: ₹606.86 crore, an increase of 11.97% from ₹542.01 crore in FY 2022-2023.
Net Profit: ₹41.45 crore, up by 8.22% compared to ₹38.30 crore.
Earnings Per Share (EPS): ₹11.80, reflecting a 7.86% increase from ₹10.94.
These figures indicate a consistent growth trajectory for Orient Technologies Ltd. in the fiscal year 2023-2024.
Quarterly Financials (Q1 & Q2 FY 2024-25)
Q1 FY25
Revenue from Operations: ₹148.85 crore.
PAT: ₹9.28 crore.
Q2 FY25
Revenue from Operations: ₹223.14 crore (49.35% YoY increase).
PAT: ₹15.05 crore (62.52% YoY increase).
Business Focus Shift: Orient Technologies is increasingly focusing on IT infrastructure and cloud-based products, with over 50% of its FY24 revenue derived from this segment. This strategic shift aligns with growing customer demand for cloud technologies.
SWOT Analysis
Strengths
Diverse Clientele: Reduces dependency on any single sector.
Strategic Partnerships: Enhances credibility and market position.
Weaknesses
Market Concentration: Focus on the Indian mid-market limits global presence.
Resource Allocation: Rapid growth could strain existing resources.
Opportunities
Public Sector Expansion: Empanelment with the PSB Alliance opens significant avenues.
Technological Advancements: Leveraging AI and automation offers growth potential.
Threats
Intense Competition: High competition in the IT services sector.
Regulatory Challenges: Evolving compliance requirements may impact operations.
Current Market Valuation
Market Capitalization: ₹2,645 crore.
Enterprise Value: ₹2,508 crore.
Valuation Ratios:
P/E Ratio: 64.60 against the Industry Average of 40.40 (Premium Valuations)
P/B Ratio: 8.70
Return on Equity (ROE): 27.30%
Return on Capital Employed (ROCE): 34.00%
Financial Strength:
Current Ratio: 2.67
Debt-to-Equity Ratio: 0.03 (indicating low leverage).
Future Outlook: Orient aims for sustained growth with a targeted 30-35% YoY revenue increase and double-digit EBITDA margins over the next 3 years. Strategic partnerships and the planned use of IPO proceeds for expansion, including a NOC and SOC, are expected to enhance capabilities and revenue streams.
Technical Outlook
The stock performance has shown a robust upward trend, supported by:
Stock Performance: All-time high closing price of ₹640.
Moving Averages: Trading above 50-day, 100-day, and 200-day averages.
Relative Strength Index (RSI): Daily RSI at 79, weekly RSI at 86 indicating over bought but bullish momentum.
Volume Trends: Increased trading volumes demonstrate strong investor confidence.
Conclusion: Orient has exhibited robust performance, underscored by strategic initiatives and a strong client base. While challenges such as resource allocation and intense competition remain, it’s focus on innovation and expansion positions it well for sustained growth in the dynamic IT sector. Note: Risk reward and the entry points to be taken care off while taking any financial decisions.
Disclaimer: This document is for informational purposes only and does not constitute any investment advice. Being invested in the company, the opinions expressed are personal and may be biased and also contain inaccuracies. Further all the figures are subject to verification.