Animated advance

PENNY WISE

Animation foray and new orders will bring scale to Accel Transmatic.

Although a majority of technology stocks are out of flavour these days, there are a few businesses which aim to strike it out different, away from the herd. Besides the run-of-the-mill software businesses, there exist opportunities in areas which are unheard of, but strike as obvious once explored.

Accel Transmatic operates in those segments of software industry, which fit the bill by not just being different, but offer vast potential markets. The company has three diverse strategic business units. Ushus Technologies provides embedded software solutions and real time systems.

Transmatic Systems is a product design and manufacturing outfit, which develops kiosks for banking and financial services and e-governance sectors. The products include electronic cheque drop machines, automated payment collection and ticket vending machines and queue management systems.

With abilities to develop embedded software and design electronic circuits in-house, the company demonstrates an edge. This division was recently awarded a pilot order to produce and install 300 automated ticket vending machines by the Indian Railways.

Its third unit, Accel Animation Studios is a visual effects, 3D animation, post production and game development studio catering to the entertainment industry.

Recently, Accel Animation commissioned motion capture equipment from US-based Motion Analysis Corporation, at its studio in Trivendrum. Although this business unit was set up just a year ago, it has managed to garner a robust project pipeline of about Rs 60 crore to be executed over the coming 18 months.

Besides its three business units, Accel Transmatic also has a specialised training subsidiary "� Accel Academy which provides education in diverse fields such as embedded software, product design, animation and special effects. 
 

ON ITS WAY
Rs crore	FY08E	FY09E	FY10E
Revenues	50.0	75.0	120.0
EBITDA	9.3	15.0	26.4
EBITDA margin (%)	18.5	20.0	22.0
Net profit	5.0	9.0	16.2
NPM (%)	10.0	12.0	13.5
EPS (Rs)	4.3	7.4	11.6
P/E (x)	9.6	5.6	3.6

Valuation
In FY07, the company posted revenues of Rs 33 crore with operating profit margins at 17 per cent and net profit margins at 10 per cent. On the back of good traction in both Transmatic and Animation businesses, the company is expected to report a decent top line growth of over 50 per cent besides expanding its profit margins.

The embedded software business is likely to continue steadily, while the training academy too, is set to flourish in the coming year. At Rs 41, the stock trades at a price-earnings multiple of 9.6 times and 5.6 times estimated FY08 and FY09 earnings, respectively. This does not seem expensive, considering the company has a visible pipeline of projects for the coming couple of years, which is growing further.