Intrasoft Technologies Research Report By Ventura

Intrasoft Technologies Ltd (ITL), is a 3rd party (3P) multi-channel e-commerce retailer in the US operating through major online retailers (Amazon, eBay, Sears, Rakuten), with astrong back end in India. The company is a unique play in the high growth US e-commerce market and has a proven track record of delivery.

The company has a sound business and caters to products procured from vendors from the US geography. The logistics are fulfilled by UPS and FedEx which have a very high ratings on fulfillment. This in turn has helped ITL climb into the platinum club of the top 25 sellers of Amazon (USA) and its sustained rating of 97%, helps it maintain its premium listing in the market places.

ITL has further leveraged this rating and has not only expanded its listed vendor base (4.1x to 1900+ nos.) but also reached a humongous level of product SKUs on offer (8.7x to 6.25 lac units).

On the back of the above, we expect orders to grow at a CAGR of 33% over FY17-FY20 to 67.4 lac units p.a. from 28.6 lac units ordered currently. The overall revenues are expected to grow at a CAGR of 33.7% to Rs. 2,241.9 crore by FY20 with the EBITDA growing to Rs. 44.8 crore (CAGR of 36.7%) over the same period. Margins are expected to sustain in the range of 1.8% to 2%.

Further, the company has also negotiated with vendors to expand its credit period to 10 days. Also by virtue of it being a platinum reseller its receivable days are only 4 days for a large part of its product portfolio. This is expected to sharply improve its cash flows and cash conversion cycle and lower the working capital requirement. As a result, ROE and ROCE are also expected to improve by 900 bps (to 20.1%) and 623bps (to 21.6%), respectively, by FY20.

We initiate coverage on ITL as a BUY with a price objective of Rs. 1555, representing a potential upside of 122% over a period of 18 months. We have arrived at the price target by applying an EV/Sales multiple of 1.0x.