The opportunity in e-commerce business of India

RS SOFTWARE: The e-payment expert!

The e-commerce business of India is set to grow multi-fold in next five years. Owing to this great opportunity, I propose to buy RS Software around Rs 630 to 670 zone for a long term span. Currently trading at Rs.685 (25th Sept 2014)

About E-commerce in India:

India's e-commerce market was worth about $2.5 billion in 2009. It went up to $6.3 billion in 2011 and further to $16 billion in 2013. It is now expected to grow as much as $56 billion by 2023, which will be 6.5% of the total retail market, as quoted by eMarketer. 

About RS Software: It commands a healthy 16% Net profit margin.

• Steady growth in revenues annually:
– USD 25 M (INR 1011 M) - 07-08
– USD 32 M (INR 1495 M) - 08-09
– USD 36 M (INR 1665 M) - 09-10
– USD 44 M (INR 1993 M) - 10-11
– USD 55 M (INR 2650 M) - 11-12
– USD 59 M (INR 3225 M) - 12-13
– USD 64 M (INR 3892 M) – 13-14

• RS Software has a record year, posts highest ever revenues and profit
• Company declares FINAL DIVIDEND of 25%, taking the TOTAL DIVIDEND for the year to 60%.
• Revenues grow by 21%, reaches Rs 389 Cr in FY 13-14 (from Rs 323 Cr in FY 12-13)
• Profit Before Tax jumps to Rs 77 Cr, up by 56%, from Rs 50 Cr in FY 12-13
• Profit After Tax reaches Rs 53.6 Cr in FY 13-14, up by 41%, from Rs 37.9 Cr in FY 12-13
• EPS increases by 32%, from Rs 32.66 in FY 12-13 to Rs 43.01 in FY 13-14
• Book Value increases by 38%

Q1 Highlights FY 2014-15

• PAT at Rs 16 Cr, signifying a jump of 48% for Q1 Y-o-Y
• EPS at Rs 12.76 registers growth of 40% for Q1 Y-o-Y
• Book Value at Rs 143.34, hike of 25% for Q1 Y-o-Y
• INR Revenues reach Rs 101 Cr, growth of 10% for Q1 Y-o-Y
• Company has declared dividend of 10% for Q1 FY 15

Credit rating upgraded to CARE A in FY 13

Technical Chart pattern:
RS Software is moving in an upward rising channel. 
Short term Elliot wave reading:
EW wave 1: 242 to 409 = 167 points
EW wave 2: 409 to 376 = 33 points viz 19% retracement
EW wave 3: from 376 onwards. Expected to reach (1.618minimum)X (EW wave 1 magnitude)
   = 1.618 X 167 = 270. Thus it should be around 646.
Extended EW 3 should be 2.67X167 = 446 points viz 822level!  It went to high of 830!!

EW wave 4: Stock made a high up to 830 had retraced to 685 (currently) viz 185 points.

EW wave 5: Expected to begin from either 670 or 680 (max at 630). Which should take it to 900 levels.

Further, after spending two weeks around 800-900 zone , the stock should resume its upward journey with new 5 waves making it reach 1500 by December 2015!! that's 121% returns.

On a longer scale of 3 years+ the stock will be a blockbuster and may even be in F&O segment after clocking a market cap of 4000Cr. Current market cap is 850Crs.