Oracle Financial Services Q3 Review - Results Miss, Healthy Licence Wins Restore Confidence: Dolat Capital

Dolat Capital Report

Oracle Financial Services Software Ltd. reported revenue growth of 14% YoY in Indian rupee terms at Rs 14.5 billion (our estimate: at Rs 14.7 billion). Revenue miss was on account of lower working days impacting the implementation revenues (down 5% QoQ at Rs 6.6 billion).

Operating profit margin stood at 40.4% for the quarter (our estimate: 41.4%) up 79 bps QoQ but the recovery was slower than expectation given sustained investments in talent costs – net added ~1000 resources on YoY basis (up 30 QoQ basis) as it is building capacity to meet rising implementation revenue opportunities (imp rev up 12% YoY on year-to-date basis).

Despite the miss in Q3 performance we believe Oracle Financial Services’ delivery continues to trend on improved track as evident from strong hiring, healthy licence wins (up 7% YoY on trailing twelve months basis at $96 million).

The current run rate suggest possibility of double digit growth in FY23E revenues (best in a decade) and gradual recovery in profitability over coming quarters.

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