Buy Take Solution Ltd., : Nirmal Bang

Nirmal Bang believe that TAKE’s net sales will grow at a CAGR of 24.6% over a next two years whereas net profit is expected to grow at a higher CAGR of 46.4% during the same period, on account of increase in demand of its products and services with the revival of global economies and expanding portfolio of company’s products and services to capture the market. They expect the company to earn an EPS of Rs.5.05 in FY 2011 and Rs. 5.79 in FY 2012. At the CMP of Rs. 39 per share, TAKE is currently trading at a PE of 7.73x FY11E and 6.73x FY12E EPS and looks very attractive. The company has historically traded at a PE multiple in the range of 9.0x-10.0x (as shown in the PE Band below) except when market conditions were bad. Therefore, we believe that TAKE should be valued on a PE multiple of 10.0x. Based on our EPS of Rs. 5.05 for FY 2011 and a target multiple of 10.0x we arrive at target of Rs. 50. Consequently, we recommend a BUY rating on the stock with a target price of Rs. 50, indicating a potential upside of 28.2%.

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