WOW - Polaris Software - JP Morgan

Significant organizational changes & robust business pipeline will fuel growth ahead
In its report dated 2nd Januaryr, 2007 J.P. Morgan India Private Limited (JP Morgan) upgrades Polaris Software Lab Ltd. (Polaris) to Overweight with CMP of Rs 174 and a target price of Rs 225.

J.P. Morgan India Private Limited (JP Morgan) mentions that Polaris Software Lab Ltd. (Polaris) has streamlined its sales function increasing accountability for client revenues and offering geography focused services. On the delivery front, Polaris has eliminated overlaps in the solutions delivery process and integrated all existing MIS systems to improve monitoring of projects. JP Morgan also enlightens that the Quality systems have been updated inline with industry and several key personnel have been changed and new performance management systems have been implemented.

JP Morgan points out that the changes in organization structure and people are beginning to show results and Management is seeing a healthy pipeline in both products and services with positive outlook on existing clients which would lead to good revenue traction in our view with 5-7% Q/Q growth over the coming 4-6 quarters. Further, JP Morgan expects margins to increase due to scale leverage, productivity improvements and better price realization. Overall, JP Morgan expects 27% revenue and 41% EPS CAGR over FY07-09E.

JP Morgan states that Polaris is trading at P/E of 11x FY08E which is cheap compared to peers. JP Morgan expects the current strong financial performance to be sustained over the coming 12-15 months and upgrades Polaris to Overweight from Neutral with a Dec-07 Target Price of Rs 225/share with potential upside of 29% from current levels.

Thanks HK