Majesco Research Reports By HDFC Sec & ICICI-Direct

Research report by ICICI Securities

Transition towards cloud & IBM partnership bodes well; reiterate BUY…

Majesco reported a strong Q2FY18 after four consecutive quarters of revenue decline.

Transition towards cloud driven model with ~80% deals on cloud in the potential deal pipeline positions the company strategically well.

Moreover, the IBM partnership is promising to be a significant deal for Majesco in the cloud space and provides good revenue visibility for the coming years.

Consequently, we expect Majesco’s rupee revenue to grow at CAGR of 6.9% in FY17-19E.

We value Majesco US (Majesco India holds 70% stake) at 4x EV/sales, which is at ~50% discount to global peers such as Guidewire to account for modest growth/margin profile.

After considering a holding company discount of 30%, Majesco’s 70% stake in Majesco works out to Rs. 725/share providing significant upside from current levels. Hence, we maintain our BUY rating.”

Research report by HDFC Securities

The IBM alliance is strategically very crucial for Majesco, and can drive significant growth ahead. The total opportunity size of the partnership is ~USD 300-400mn over a five-year period.

We maintain our positive stance on Majesco based on (1) Rising adoption of third-party software by US P&C insurance majors, (2) IBM partnership benefits, (3) Improving deal wins within Tier-1, and (4) ramp-up in cloud subscription revenues (~10% of rev currently with higher margins). We maintain BUY with a TP of Rs 645 (upside of 28%) based on EV/rev multiple of 2.0x (~70% discount to Guidewire).”