Allied Digital Services (ADSL) is riding on high-growth domestic markets of system integration (SI); IT infrastructure management services (IMS) and remote infrastructure management (RIM). RIM is expected to be $13-15bn opportunity for the Indian IT industry by ’13 from the current $3.6bn, as per the latest Nasscom and McKinsey report. Recent acquisition of EnPointe Global Services (EGS), the US-based IMS provider, marks ADSL’s foray into international markets. Strong revenue visibility, changing business mix, improving margins and higher return ratio make it a good investment bet.
We expect 60%-70% CAGR in EPS over next 3 years. At the current market price of Rs 470, stock trades at 7.8x and 6.5x of FY10E and FY10E earnings, respectively. This makes it quite an attractive investment bet.