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October 17, 2005
| Press Release
Nucleus Software reported good results for the quarter ended September 2005. The products business maintained its strong growth momentum contributing to 36% of total sales revenues. Client addition remained healthy with the company adding 6 new clients (5 new product orders for its flagship product FinnOne and Cash management) and total order book of around Rs 1100 mn. Nucleus’ operating margins declined sequentially to 30% from 32.8% on account of salary hikes during the quarter. Going forward, we expect products business to be the main growth driver for the company. At CMP of Rs 280, the stock trades at 13.3x FY06E EPS of Rs 21.1 and 10x FY07E EPS of Rs 27.9. We remain positive on Nucleus business prospects and maintain our ‘Accumulate’ rating on the stock.
Products drive growth
Nucleus reported good 2Q FY06 performance with 8.8% q-o-q growth in sales revenues to Rs 357.3 mn and 2.4% growth in net profit to Rs 87.9 mn. Product segment reported healthy 13.3% q-o-q growth in sales revenues to Rs 128.3 mn and contributed to 35.9% of sales as against 34.5% in the previous quarter. Projects business remained almost flat at Rs 194.6 mn and contributed to 54.5% of sales, while professional services contributed to 9.6% of total sales.
Salary hike restricts margin expansion
Nucleus’ gross margins during the quarter declined from 48.8% to 44% amid salary hikes during the quarter. However flat selling and marketing and lower general and administrative expenses resulted in operating margin decline to 30% from 32.8% in the previous quarter.
Other result highlights:
With good 1H FY06 performance, we believe Nucleus is on track to achieve our FY06E estimates of Rs 1363.4 mn sales revenues and net profit of Rs 340.1 mn. At CMP of Rs 280, the stock trades at 13.3x FY06E EPS of Rs 21.1 and 10x FY07E EPS of Rs 27.9. We maintain our ‘Accumulate’ rating on the stock.
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Nucleus Software Stock Report
Products drive growth
Nucleus reported good 2Q FY06 performance with 8.8% q-o-q growth in sales revenues to Rs 357.3 mn and 2.4% growth in net profit to Rs 87.9 mn. Product segment reported healthy 13.3% q-o-q growth in sales revenues to Rs 128.3 mn and contributed to 35.9% of sales as against 34.5% in the previous quarter. Projects business remained almost flat at Rs 194.6 mn and contributed to 54.5% of sales, while professional services contributed to 9.6% of total sales.
Salary hike restricts margin expansion
Nucleus’ gross margins during the quarter declined from 48.8% to 44% amid salary hikes during the quarter. However flat selling and marketing and lower general and administrative expenses resulted in operating margin decline to 30% from 32.8% in the previous quarter.
Other result highlights:
- 6 new customers added during the quarter taking the total active clientele to 105.
- Healthy order book at around Rs 1100 mn out of which product orders stood at Rs 630 mn.
- Debtor days reduced to 59 days from 72 days in the previous quarter.
- GMAC order status – Italy moving well, however China has got delayed due to infrastructure issues with the client.
- Added 54 employees during the quarter taking the total employee base to 989.
With good 1H FY06 performance, we believe Nucleus is on track to achieve our FY06E estimates of Rs 1363.4 mn sales revenues and net profit of Rs 340.1 mn. At CMP of Rs 280, the stock trades at 13.3x FY06E EPS of Rs 21.1 and 10x FY07E EPS of Rs 27.9. We maintain our ‘Accumulate’ rating on the stock.
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About Nucleus Software
Nucleus Software Exports Ltd. is a publicly traded (BSE: 531209, NSE: NUCLEUS), software product company that provides lending and transaction banking products to global financial leaders.
Nucleus Software powers the operations of more than 200 Financial Institutions in over 50 countries, supporting retail lending, corporate banking, cash management, mobile and internet banking, automotive finance and other business areas. Its products facilitate more than 26 million transactions each day, managing over US $ 500 billion of loans and enabling more than 500,000 users logging in daily.
Nucleus Software’s flagship products, built on the latest technology are:
Nucleus Software powers the operations of more than 200 Financial Institutions in over 50 countries, supporting retail lending, corporate banking, cash management, mobile and internet banking, automotive finance and other business areas. Its products facilitate more than 26 million transactions each day, managing over US $ 500 billion of loans and enabling more than 500,000 users logging in daily.
Nucleus Software’s flagship products, built on the latest technology are:
- FinnOne NEOTM : The next-generation digital lending solution that is built on an advanced technology platform.
- FinnAxiaTM : An integrated global transaction banking solution used by banks worldwide.
- PaySeTM : The world’s first online & offline digital payment solution created with an aim to democratize money.
For more information, please visit : https://www.nucleussoftware.com
For Media related information, please contact:
Sunil Kumar Singh / Kiran Hans Khowal
Finese PR
Email: nucleus@finesepr.comPhone: +91-9818363518 | +91-8375969143
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