In my previous
posts on Quick Heal (For Earlier posts, Click here and here) I was expecting it to make a recovery in its business
after recent headwinds in the economy….and it has delivered Quick. Quick heal
has given good set of numbers in Sep-17 quarter results. I just want to
highlight some of the glaring factors:
posts on Quick Heal (For Earlier posts, Click here and here) I was expecting it to make a recovery in its business
after recent headwinds in the economy….and it has delivered Quick. Quick heal
has given good set of numbers in Sep-17 quarter results. I just want to
highlight some of the glaring factors:
1.
Topline is flat at 105 vs 106
cr. But it is commendable keeping in view the recent headwinds in the economy
due to GST/Demoney, Quick heal revamping its distribution channels, strong competitions
as competitors have also upped the ante for marketing and distribution. This flat will look elevated if you compare it with the HIGH
market expectations of de-growth. For reasons related to the “Indian-ness” of
QH, market had literally thrown it into the dump.
Topline is flat at 105 vs 106
cr. But it is commendable keeping in view the recent headwinds in the economy
due to GST/Demoney, Quick heal revamping its distribution channels, strong competitions
as competitors have also upped the ante for marketing and distribution. This flat will look elevated if you compare it with the HIGH
market expectations of de-growth. For reasons related to the “Indian-ness” of
QH, market had literally thrown it into the dump.
2. Overall user base witnessed
good growth especially enterprise segment which I feel will see high growth in
the future. Enterprise segment now has 21% share in the total revenue as
compared to 16% last year. This quarter revenue growth in the enterprise
segment is 27% while retail segment has de-grown by 7%. However this fall in
retail revenues is mainly due to higher demand for low value products as figure
of number of retail licenses sold this quarter have increased to 20.26 lac as compared
to 19.62 lac last year.
good growth especially enterprise segment which I feel will see high growth in
the future. Enterprise segment now has 21% share in the total revenue as
compared to 16% last year. This quarter revenue growth in the enterprise
segment is 27% while retail segment has de-grown by 7%. However this fall in
retail revenues is mainly due to higher demand for low value products as figure
of number of retail licenses sold this quarter have increased to 20.26 lac as compared
to 19.62 lac last year.
3. In spite of “visible” flat
revenues it has still managed to report higher PBIT figure of 59 cr Vs 55 cr
last year. Again this is significant as this was not expected. I think its profits are impacted due to high
focus and expenditure on developing distribution channel to penetrate the
tier-2&3 cities.
revenues it has still managed to report higher PBIT figure of 59 cr Vs 55 cr
last year. Again this is significant as this was not expected. I think its profits are impacted due to high
focus and expenditure on developing distribution channel to penetrate the
tier-2&3 cities.
Distributors and physical distribution reach still is one of the most
significant winning factor even when people take “Internet/E-commerce” as a panacea
for everything. Even providers of cloud have realized the role of distributors
and Our Redington India and global giant Ingram Micro are big players in the
distribution of cloud products.
significant winning factor even when people take “Internet/E-commerce” as a panacea
for everything. Even providers of cloud have realized the role of distributors
and Our Redington India and global giant Ingram Micro are big players in the
distribution of cloud products.
4.
Working capital
management has improved big time. QH has managed to bring down the debtors from
95 cr in Mar-17 to 61 cr. This has resulted in the
improvement in working capital days from 48 last year to 34 now further
improving cash flows.
Working capital
management has improved big time. QH has managed to bring down the debtors from
95 cr in Mar-17 to 61 cr. This has resulted in the
improvement in working capital days from 48 last year to 34 now further
improving cash flows.
5. Now coming to
one of the most overlooked fact. QH has around 420 cr in investments and cash
in books which is around 30% of the current market value of 1470 cr!! Market has decided to blindfold itself with the “Indian-ness” of QH and
ignored the most basic valued factors of a good stock. If we leave this 420 cr
out along with related interest income then it means that QH is available at a
market value of 1000 cr and its PE will touch 18-20 which is very cheap.
one of the most overlooked fact. QH has around 420 cr in investments and cash
in books which is around 30% of the current market value of 1470 cr!! Market has decided to blindfold itself with the “Indian-ness” of QH and
ignored the most basic valued factors of a good stock. If we leave this 420 cr
out along with related interest income then it means that QH is available at a
market value of 1000 cr and its PE will touch 18-20 which is very cheap.
Also this high cash means QH can use this for
acquisitions in high tech fields and I have no doubt that very soon we’ll see
something big like this coming out.
acquisitions in high tech fields and I have no doubt that very soon we’ll see
something big like this coming out.
6. QH cyber
security products have protection from ransom ware and recently when globe was
hit by “Wannacry” ransom-ware, No QH client was affected by Ransom-ware. But People raise questions about the technical expertise of QH. I have explained in my earlier post about the
collaboration of QH with Cert-in (Ministry of Electronics and Information
Technology) for providing free services for the removal of Botnet in India. But
what does it mean?
security products have protection from ransom ware and recently when globe was
hit by “Wannacry” ransom-ware, No QH client was affected by Ransom-ware. But People raise questions about the technical expertise of QH. I have explained in my earlier post about the
collaboration of QH with Cert-in (Ministry of Electronics and Information
Technology) for providing free services for the removal of Botnet in India. But
what does it mean?
Why Indian Govt has decided to choose QH for the task
if there are so many highly advanced global cyber security firms operating in
India especially when most of them are already providing their products FREE? I have seen many people questioning the idea of paying a price for a cyber-security
product when these are available free.
if there are so many highly advanced global cyber security firms operating in
India especially when most of them are already providing their products FREE? I have seen many people questioning the idea of paying a price for a cyber-security
product when these are available free.
Then why QH was chosen? Whether it is because of
technical expertise of QH? Whether other high tech free product providers were
not willing to provide it free? Or it is because our Govt prefers (or needs)
Indian-ness in cyber security? I am leaving it to you people to decide.
technical expertise of QH? Whether other high tech free product providers were
not willing to provide it free? Or it is because our Govt prefers (or needs)
Indian-ness in cyber security? I am leaving it to you people to decide.
7.
I have already shared in
earlier posts that Indian Govt will give preference to Indian products. Why? If we go by the information leaked by Edward
Snowden, countries especially US and China are watching, scrutinizing India all
the time. In fact India is one of the most watched, and scrutinized nations of
the world. Chinese hackers are breaking and stealing information from servers
of Indian Govt all the time so easily. And at times when our Govt is dreaming,
selling and hoping digital India and smart cities, the threat to our cyber
security are serious.
I have already shared in
earlier posts that Indian Govt will give preference to Indian products. Why? If we go by the information leaked by Edward
Snowden, countries especially US and China are watching, scrutinizing India all
the time. In fact India is one of the most watched, and scrutinized nations of
the world. Chinese hackers are breaking and stealing information from servers
of Indian Govt all the time so easily. And at times when our Govt is dreaming,
selling and hoping digital India and smart cities, the threat to our cyber
security are serious.
Quick heal was advised recently around 180 and it closed today at 208,
up 6%. But it is still way cheap at PE of 20. Promoters have not sold a single
share in the IPO, not afterwards…it is investing heavily on brand building…more
than any other brand. Better to pick it now before
it is too late to HEAL.
(Views
are personal and should not be taken as a recommendation for buying or
selling a stock. Stock markets are inherently risky so kindly do your
Due Diligence before investing. I am not a certified Sebi Analyst and
holding the shares discussed in this Post)
.
I have also tracked the company since its IPO. I like the industry but I am not sure of the technical capability of the team. Teaming with the government is a big plus and I can see the business explode; but at the same time the government will want a technically superior solution to safe guard their network/data against cyber threats. May be that will force QH to invest and ensure technical superiority. They are investing 36% of their cost in R&D. I am an investor.
Do you track Nucleus Software? I like that space as well, but unsure of management and it's ability to aggressively grow the company.
Hi Dear, I think that QH has a fair bit of technical expertise; enough to be regarded as able competitor to MNC giants. Its behavior technology, advanced cyber security products for a variety of users, its strong intent to venture into global markets which is not possible for a low tech player to have the confidence to invest that much for the global expansion unless they have the right technology in place at right price.
Off late it is further focusing on increasing its exposure to high tech areas like IOT, cloud-recently it has inked a deal with Jetico for Data encryption products. Jetico is a finnish giant in data encryption. Let’s hope that QH will emerge as India’s best in cyber technology.
Regards
I do not track Nucleus although prima facie it doesn't look bad. In IT, i have invested in some niche companies like KPIT tech and Cybertech systems.
Hello Sir, is quick heal still advisable to buy @245 and what is the target price to sell
Hi Dear, I never buy a stock for short term…for getting some 30-40% returns. I keep stocks for years…still holding almost all of the stocks discussed at this blog giving 20-30-40 times returns like KRBL, Eveready,Lt Foods, Future retail, Venky's etc. When you are taking the risk of loosing all of your money by choosing to invest into equities so you should hold the good stocks for very long time to absorb the maximum gains.
The same thing i am expecting from QH so it is still early days for QH…a lot will happen in the future and if QH can manage to stay relevant and technically superior (Which it will) then we'll witness a giant. So if you understand the business of QH and can take the risk and your portfolio is having sufficient scope for investing into a risky stock then QH is still a buy.
Also, please always append your name while posting something.
Regards
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