Technicals: As always technicals first. The stock had found it difficult to break past its resistance levels of 45 for last nine years and finally broke out of this resistance after giving this massive breakout on huge volumes. As I said this nine year breakout was accompanied by volumes and momentum breakout on monthly charts. These are substantial breakouts and normally go up 5x, 10x and more. As per waves, this is the start of third wave on smaller wave timeframe, which itself is within the third wave of larger wave cycle. The pitchfork drawn on medium term charts confirms the continuation of the uptrend in the short term as its bounced back exactly from the support lines. The moving averages had given a golden cross on long term charts a few months earlier on back of very strong volumes. The stock after giving the breakout, tested its long term breakout level earlier last week (as we have seen in earlier stocks, its usually the last chance of entry for long term investors) and has re-started its upmove. On back of these various studies, one can arrive at the short term target of 140rs and 350 as first long term target.
Story: The company is a software products company majorly into Defense, eLearning and Banking. The company gets approximately 40% of its revenues from defense and overall has improved its operating profit margins consistently in the last few quarters. Now the most exciting part is that in its recently declared results, in the notes, they have written that they would had a PAT of 3.86cr but majority of that was taken away by forex loss on back of strong INR appreciation. This means the company has again improved its OPMs this quarter also. If we try to extrapolate the numbers, then its likely that the stock will give an EPS of around 14rs in the coming year. Now this quarter the INR movement has been very stable and if it continues, then one cannot rule out and EPS of around 3.5rs that could be declared for Q1FY18 and that itself will cause re-rating. Best way to understand the company is to go through the below mentioned link of Chiarman’s interview. SL – 40rs.
Link to Chairman’s interview->http://www.indiainfoline.com/article/editorial-interviews-leader-speak/interview-of-sridhar-n-chairman-md-sankhya-infotech-limited-117021700507_1.html
Link to AR -> http://www.bseindia.com/bseplus/AnnualReport/532972/5329720316.pdf
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