Stock Idea: Cranes Software International Ltd.

Cranes Software International Ltd (Rs 42)

(BSE Code- 512093 NSE Code- CRANESSOFT) (P/E- 4, Market Cap- 494 cr.)

Cranes Software (CSI) is a specialised software products company, focussed on providing products and solutions to address the needs of scientists and engineers globally. The company's main focus areas are data visualisation and presentation, statistical and analytical software and engineering. Cranes' core success lies in its unique `Acquire-Enhance-Expand' business model. This model has enabled the company to create a significant intellectual property (IP) driven technology business within the focus area of scientific and engineering software. Acquisitions are an integral part of Cranes' business model and their success the basic reason for the company's strong performance in the past. Its acquisitions include products that have faced problems due to shortage of funds, weak management, and lack of sales and marketing network. These products are usually technologically strong and have brand names. Cranes acquires such products and then uses its R&D capabilities and marketing network to further enhance and sell them.Today, CSI has its presence in 39 countries across the world and has a 350,000 strong global user base. Cranes Software offers a range of proprietary products - SYSTAT, SigmaPlot, SigmaStat, SigmaScan, TableCurve 2D, TableCurve 3D, PeakFit, NISA, XID, XIP, Survey ASYST, iCapella, InventX and world-renowned products from reputed principals such as Engineering Technology Associates, The Mathworks, Texas Instruments and IBM. The company has grown its sales and net profits at compounded rates of 58% and 67% respectively over the period FY02 to FY06. One of Cranes' major strengths is marketing. The company has direct offices in five locations - the US, the UK, Germany, India and Singapore - apart from distributors. The strong distribution network of the company has been one of the key reasons as to why it has been able to ramp up sales of the acquired products over a period of time.Total consolidated revenues for Q1FY10 are up 6% to Rs. 121.8 cr. whereas PAT for Q1 is at Rs 28.1 cr.. EPS for Q1 ended June 2009 is Rs 2.4. Total consolidated revenues for FY09 were up 32.7% to Rs. 528.9 cr.. Overseas revenues increased 41.0% to Rs. 450.9 cr. and constituted 88.6% of total revenues. Operating profit improved by 17.9% to Rs. 240.2 cr.. Operating margins for the year stood at 45.4%. Net profit after tax is up 5.5% to Rs 121.3 cr.. Accordingly, FY09 EPS on a Rs 2 paid up share stood at 10.3 on a equity of 23.55 cr.(Promoter's stake- 36.68%, FII Stake- 41.78%) and the dividend declared is 10%. Proprietary products grew by 31% on a corresponding basis and constituted 87% of total revenues. CSI expects this segment to grow at a healthy pace and constitute majority of total revenues. CSI has, with a longer-term view, invested in proprietary technologies that would deliver returns over a longer period of time. These include wireless technology standards and micro electro-mechanical systems (MEMS).During the year, CSI entered into alliances with several leading Companies and announced new product launches that will serve as a platform for its future growth initiatives. Going forward, it will continue to focus on consolidating operations to sustain long term growth and with increased emphasis on productivity of resources. CSI's premier graphing application, SigmaPlot 11 won the Scientific Computing Magazine's Reader's Choice Award 2008 in the 'Graphing' and 'Statistical Analysis' categories. CSI shifted its Engineering and Technology operations to 35,000 sq ft of own office premises which is expected to result in considerable savings in FY10. The company continues to witness strong traction in its IP-led business model. The continuous launch of newer versions of its proprietary products is a positive factor which is necessary in order to sustain growth in a product-led business model, it is necessary to have a strong R&D set-up in place, as well as a strong marketing network. The company is also in the process of launching its `Solutions' business, which will drive the topline going forward. This initiative will give Cranes an end-to-end solution suite in the niche area of engineering and scientific software products. The stock currently trades at Rs 42, implying a P/E multiple of 4 times FY09 earnings. Investors can start accumulating the stock at current levels and add more on declines for decent returns of 40%-50%over the next 6-8 months.

Source: Internet (By Sanjay Chhabria)