Oracle Financial Services - Q2 Miss, Adverse Seasonality Apparent In Muted License: Dolat Capital

Dolat Capital Report

Oracle Financial Services Software Ltd. reported revenue growth of 16% YoY in Rs terms at Rs 16.7 billion (our estimate: at Rs 17.3 billion, 19.6% growth). Revenue miss was due to weaker than expected license signings at $22 million (our estimate: $25 million). However, Ebit margin improved to 43.8% (our estimate: 43.1%), up 645 bps YoY attributed to cost control and improved operational efficiencies.

Cloud and License revenues for Q2 stood at ~$22 million and were down 33% QoQ but up 37% on trailing twelve months basis. Headcount saw an addition of 167 resources to support implementation traction.

Cloud deals continue to drive the new win momentum & thus to avoid ambiguity the company has stopped disclosing licence signing data in Q2.

We believe healthy license win momentum would ensure double digit growth in FY25 and any further large deal wins would add comfort on visibility beyond that.

Given the consistent performance and positive outlook we have upgraded our rating to ‘Accumulate’ with DCF-based target price of Rs 11,420 (implies ~32 times FY27E PER).

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