Phillip Capital (India) has a buy call on Intellect Design Arena with a target price of Rs 330. The current market price of Intellect Design Arena is Rs 185.60. Time period given by the brokerage is one year when Intellect Design Arena price can reach the defined target. Investment rationale by the brokerage: Strong deal traction over the last 15 days: The company announced three large ‘destiny’ (over $3mn) deals over the last 15 days.

1) $10mn (PC estimates) deal from Emirates NBD - the third largest bank in GCC, for End-to-end Digital Transformation of Emirates' Transaction Banking business (across UAE, SA, Egypt, India, Singapore and the UK), 2) USD $5mn (PC estimates) deal from HUDCO - a GoI undertaking, for Implementation and Support of an Integrated Lending and ERP Solutions, and 3).

USD $3mn deal from Bank of Bahrain and Kuwait (BBK) for Digital Transformation of BBK's Transaction Banking business. Sales partnerships: The company has partnered with 7 Global companies over the last 3 quarters.

1) IBM SI partnership for GTB in the US region, 2) PPI sales partnership for GTB in Europe region (Germany, Italy, Spain), 3) AWS cloud partnership, 4) R3 sales partnership for GTB in the Blockchain area, 5) Bolero sales partnership for GTB in Trade Finance, 6) Pivotal sales partnership for GTB in US, Europe and 7) Everis sales partnership for GTB in Europe.

These partnerships will help the company strengthen its footprint in the US and Europe markets – which contributes 50 per cent to the revenues. Strengthening the leadership team: Over the last three quarters, the company hired multiple senior executives to strengthen its leadership team in various geographies/segments.

In June 2018, it hired Janet Thomas (ex-BoA, ex-Citigroup) as a CEO – Digital Strategy (RTM).

With the company’s aim to treble its GTB revenue by 2021, it also hired Alvaro Cisneros as Head – Southern Europe in September 2018.

Mr Alvaro was instrumental in driving Banco Santander’s growth in the Iberian Peninsula region.

The company has also hired Borna Ljubicic as a Head – Continental Europe operations (he has previously worked with Unicredit in the Continental Europe). Q3FY19 – an aberration in an otherwise strong growth story: The company reported moderate revenue performance (-3.4 per cent qoq) in Q3FY19, after a very strong 22 per cent qoq growth in the previous quarter, while margins continued to remain strong, with +30bps qoq expansion.

We believe, the below-expected performance in Q3 was an aberration in an otherwise a strong growth story (growth of 26 per cent in 9mFY19), and revenue growth to rebound from Q4 onwards – driven by the strong dealflow in the recent times. Strong order-backlog: INDA has witnessed strong new deal wins in the last three quarters, resulting in a strong order-backlog of US$ 199mn (ex-GeM, and at 1x Book-to-bill) – of which management expects 70 per cent to be executed over the next 12-months.

This, along with US$115mn orderbook from GeM (over five years), provides good visibility for FY20 and beyond. Outlook and valuations: We expect INDA to report 22 per cent USD revenue growth (25.8 per cent in 9mFY19).

With increasing acceptance in the US and in Europe through various sales partnerships, the share of its license fees should improve, thus improving profitability.

INDA trades at 1.0x FY21 EV/sales — a significant discount to global IT product companies.

We have not made any changes to our FY20/21 estimates.

We continue to value INDA at 2.0x FY21 EV/sales, at 50 per cent discount to global players, (and 33 per cent discount to Majesco, which we value at 3x EV/Sales).

We maintain Buy with the price target of Rs 330 (unchanged).