Price: 477 | View: Strong Buy

Cigniti Technologies Limited (“Cigniti Technologies” or the “Company”) is the world’s leading Independent Quality Engineering & Software Testing services company, bringing the power of AI into Agile and DevOps, to accelerate enterprise digital transformation.

Cigniti Technologies offers Services including Traditional Quality Assurance & Testing, Quality Engineering, Digital Testing and many more services. The Company’s operations spread across the US, UK, India, Australia and Canada. It is North America’s largest independent software testing company.

Key Verticals: BFSI, Travel & Hospitality, HealthCare, ISV, Retail & ecommerce

Cigniti Technologies Core Service Offerings for Large Enterprise Clients

[1] Quality Engineering and Specialized Offerings [2] Quality Assurance and Traditional Offerings [3] Digital and Next Generation Offerings
·       Performance Engineering

·       Test Data Management

·       Test Environment Management

·       Tools Streamlining

·       DevOps Enablement

·       End to End Automation

·       Service Virtualization

·       Resiliency and Reliability Testing

·       Security Testing

·       Test Automation

·       Performance Testing

·       Functional Testing

·       Globalization Testing

·       Compatibility Testing

·       Regression Testing

·       IoT Assurance

·       Cloud Assurance

·       Omni and Multi-Channel Testing

·       AI testing

·       Blockchain Testing

·       Robotics Automation

·       Mobile Testing

Marquee Clients Across Industry Verticals

Cigniti Clients

Cigniti REvenue

Financial Performance

Particulars FY17 FY18 FY19 FY20 FY21
Revenue (In Rs. Cr.) 619.26 693.51 816.87 871.97 896.53
Growth 11.99% 17.79% 6.75% 2.82%
EBITDA (In Rs. Cr.) -22.07 52.28 133.57 128.69 145.47
EBITDA Margin -3.56% 7.54% 16.35% 14.76% 16.23%
EBIT (In Rs. Cr.) -39.03 49.57 130.42 117.21 133.20
EBIT Margin -6.30% 7.15% 15.97% 13.44% 14.86%
PBT (In Rs. Cr.) -54.89 32.94 142.23 130.84 141.06
PAT (In Rs. Cr.) -394.83 32.17 147.36 121.60 105.35
PAT Margin 4.64% 18.04% 13.95% 11.75%
EPS (In Rs.) -140.91 11.48 52.59 43.40 37.63
EPS Growth Rate 358.07% -17.48% -13.29%
Historic P/E (Closing Price of 31st March) 22.29 5.59 5.90 8.60
CURRENT P/E 11.03
CURRENT PE/ROE 0.39
D/E -3.41 18.29 0.49 0.31 0.04
PE/ROE 0.05 0.06 0.13 0.30
EV/Sales 1.50 1.14 0.99 0.94 1.17
Interest Coverage (1.37) 3.08 9.12 16.09 26.02
ROCE 37.35% 58.11% 33.39% 34.29%
ROE 97.76% 45.50% 28.29%

FY 2017 – Loss on account of exceptional items. Cigniti has incurred substantially on development of software testing products and tools over the past few years.  In light of various changes and the overall market outlook for its software products in the testing space, the Company has carried out an impairment analysis and decided to fully impair such tool developments costs amounting Rs. 332.08 Cr. on a conservative and prudent basis in line with the requirements of the accounting standards.

Quarterly Performance

Q4 FY 2020 Q1 FY 2021 Q2 FY 2021 Q3 FY 2021 Q4 FY 2021 TTM Q-o-Q % Y-o-Y

%

Revenue 233.04 218.40 223.90 223.90 233.02 899.22 4.07% -0.01%
EBITDA 31.55 36.06 44.21 31.95 33.25 145.47 4.07% 5.39%
EBITDA Margin 13.54% 16.51% 19.75% 14.27% 14.27% 16.18%  
PAT 29.26 29.11 25.22 26.35 24.67 105.35 -6.38% -15.69%
PAT Margin 12.56% 13.33% 11.26% 11.77% 10.59% 11.72%  
EPS 10.48 10.41 9.01 9.39 8.82 37.63 -6.07% -15.84%

Q4 Highlights:

  • Cigniti Technologies closed 22 new logos. 50% of these logos come from the North American region, remaining 50% comes from areas such as UK, Australia and Middle East.
  • Top 20 clients contributed 48% of revenue
  • FY21 PAT is after onetime tax adjustment of Rs 8.95 Cr. on account of tax assessment for earlier years of US subsidiary Cigniti Technologies Inc.; Net profit before taxes for earlier years stood at Rs 114.30 Cr.
  • The Company has entered the new financial year with a healthy sales run rate and a good order book position and is confident of marching ahead positively in the coming years.

INVESTMENT RATIONALE

  • Many of the world’s largest and most innovative companies turn to Cigniti to get assistance on accelerating their digital transformation efforts and obtaining higher returns on their investments into Quality Engineering initiatives. Cigniti has a strong application testing expertise and uses its portfolio of testing IP, including its core testing platform, BlueSwan. Cigniti leverages its test automation accelerators, industry accelerators and testing labs within mobile, IoT, medical devices and robotics, as well as its COEs in enterprise application platforms (such as Oracle, SAP and Salesforce), RPA, cybersecurity, and specialized testing areas like performance, mobile and test data management for delivering customer-centric quality assurance services.
  • The Company has also identified a few other areas closer to testing. But our core competency still continues to be quality engineering. And within the quality engineering space, 46% accounts to test automation. And in the overall scheme of things, less than 10% of the revenues come from areas outside of quality engineering.
  • Traditionally the Company used to have a major share from Travel & Hospitality industries, but the past year has decreased its revenue from the industry to 17% when compared to 27% in the previous year. The Company’s renewed focus on Healthcare & Life Sciences, BFS & Insurance, and Retail & Ecommerce has allowed it to sustain its growth momentum. Recent wins like a Europe-based motor vehicle manufacturer, Japan-based multi-national automaker and expansion of contract with Toyota in Australia have added up to its confidence to focus on this industry as well.
  • Niche Player in Application Testing Services – The Company has been as positioned as a ‘Niche Player’ in the December 2020 Gartner, Inc. Magic Quadrant for Application Testing Services, Worldwide. This is the 6th consecutive year Cigniti has been positioned in this Magic Quadrant. Cigniti keeps investing in BlueSwan by enhancing current capabilities. Enhancements include automation accelerators, quality engineering (to increase first time right products and releases), prescriptive analysis, migration platforms and sentiment analyzer tools.

Cigniti niche player