Softtech Engineering Ltd’s EBITDA Surged 26.85% YoY
Company Overview:
Softtech Engineering Ltd, established in 1996, operates in the software products and services sector, primarily serving the architecture, engineering, and construction (AEC) industry. The company has a diverse portfolio comprising seven products that cover the entire construction value chain. Notably, their AutoDCR solution automates building and layout plan approvals, contributing to Smart City projects. Softtech Engineering Ltd has a global presence, having served over 4600 clients in India and around the world.
Product Portfolio:
Their product portfolio includes AutoDCR, PWIMS, and OPTICON. AutoDCR streamlines building plan approvals by analyzing 2D CAD drawings for compliance with Development Control Regulations. PWIMS offers integrated works and procurement management for civil infrastructure organizations, while OPTICON serves as an ERP solution for construction enterprises, optimizing various construction processes.
Industry Overview:
Operating within the IT and Technology industry, Softtech Engineering Ltd is positioned well, given the promising prospects of the Indian software product industry, expected to reach $100 billion by 2025. Furthermore, the growing demand for AI is driving the data annotation market, which is anticipated to reach $7 billion by 2030.
Valuation and Key Ratios:
As of the latest data, the stock of Softtech Engineering Ltd is trading at a substantial multiple of 77.6x earnings per share (EPS) of 3.78, with an industry PE ratio at 36.4. The stock also trades at 2.44 times its book value. The company reports a moderate return on equity (ROE) of 3.91% and return on capital employed (ROCE) at 7.85%. Additionally, an interest coverage ratio of 2.44x suggests the company’s solvency. The EV/EBITDA ratio stands at 14.2, and the total debt is reported at 48.1 Crores.
Q1FY24 Results Updates:
In the first quarter of FY24, Softtech Engineering Ltd witnessed robust YoY revenue growth of 54.97%, reaching 18 Crores, although it showed a minor QoQ increase of 2.57%. Operating expenses also increased by 67.55% YoY, reflecting growth challenges. EBITDA grew by 26.85% YoY to 4.75 Crores, but EBITDA margins dropped by 500 basis points (bps) YoY due to the significant increase in operating expenses. EBIT increased by 19.68% YoY, but margins declined by 200 bps YoY due to increased depreciation. Profit after tax (PAT) declined by 27.84% YoY, yet saw a substantial QoQ increase of 285.71%. The earnings per share (EPS) for the quarter stood at 0.49 Rs, marking a 27.54% YoY decrease.
Conclusion:
Softtech Engineering Ltd is a well-established player in the AEC software domain with a diverse product portfolio. While their Q1FY24 results indicate strong YoY revenue growth, increasing operating expenses and declining margins raise some concerns. Investors should carefully monitor the company’s ability to manage expenses and sustain profitability in a competitive and evolving market.
