Oracle Financial Services Software Q1 - Results Beat, Healthy Cloud Wins Adding To Visibility: Dolat Capital

Dolat Capital Report

Oracle Financial Services Software Ltd. reported rev. growth of 19.1% YoY in Indian rupee terms at Rs 17.4 billion (our estimate at Rs 16.5 billion, 14% growth). Revenue beat was led by seasonality led healthy license revenue recognition (up 37% YoY).

Healthy licence wins along with strong cost control led to improved Ebit Margin at 47.6% (our estimate: 42.8%), up 641 bps YoY.

License signings for Q1 stood at $35.1 million up 28% YoY. Meanwhile, headcount remained flat at 8700. Cloud deals continue to drive the new win momentum and thus may impact license realisation in near term but adds better visibility and reduces volatility in performance.

Oracle Financial Services Software’ healthy license win momentum and robust commentary on pipeline has increased our confidence on growth prospects, prompting us to raise our FY25/FY26E earnings estimates by 2%/3% respectively.

We remain positive on medium-to-long term prospects given leadership in large, underpenetrated CBS market. However, given the sharp recent up-move we revise our rating to ‘Reduce’ (earlier Accumulate) with DCF based target price of Rs 10,500 (implies ~32 times FY26E PER, ~three times on PEG). Our bias remains to add into the name at right price points.

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