Shares of this company have fulfilled what every investor dreams of: minting money! Brightcom Group shares have soared over 2,700 percent in the past one year and have skyrocketed over 7,000 percent in the past three years.

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From about Rs 5 in January last year, the scrip has shot up to around Rs 190 level.

In simple words, if one had invested Rs 50,000 in Brightcom Group shares a year back, their value of investment would stand at Rs 19,00,000 as of today.

About Brightcom Group

Brightcom Group is a global provider of comprehensive online or digital marketing services to direct marketers, brand advertisers, and marketing agencies. The company is divided into three major divisions: (i) Media (Ad-Tech and digital marketing), (ii) Software services, and (iii) Future technologies. Its primary clients are end advertisers, agencies and publishers, but also include ad exchanges & networks. Digital marketing accounts for a significant portion of Brightcom Group’s revenue pie.

The company’s client list contains some of the biggest names like Airtel, British Airways, CocaCola, Hyundai Motors, ICICI Bank, ITC, ING, Lenovo, LIC, Maruti Suzuki, MTV, P&G, Qatar Airways, Samsung, Viacom, Sony, Star India, Vodafone, Titan, and Unilever.

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The company has 16 subsidiaries as of March 31, 2021. There is no material change in the nature of the business carried on by the subsidiaries.

Looking at the revenue and profit growth, the company is targeting a Free Cash Flow (FCF) of about Rs 250 crore by the end of March 2022, and is looking at an additional Rs 250 crore by the end of June 2022. The digital marketing company is focussed singularly on creating significant shareholder value, by constantly improving FCF generation and increasing Return on Equity (RoE).

Company Financials

The company’s board will meet on January 25 to consider and approve its December quarter results.

On a YoY basis, Brightcom Group’s consolidated revenue soared 73 percent and net profit skyrocketed 106 percent. Total income for the September quarter came in at Rs 1103.86 crore and net profit stood at Rs 212.1 crore.

Public shareholding in the company’s stock has increased from about 53 percent as on March-end 2019, to nearly 76 percent as on December-end 2021. Meanwhile, stakeholding of promoters and Foreign Institutional Investors (FIIs) has reduced dramatically.

Promoters owned 39 percent stake as on March-end of 2019 as compared to 22 percent as on December-end of 2021, while FIIs shareholding fell to around 2 percent as on December-end 2021 from 7 percent as of March-end 2019.

Technical view

Kkunal Parar, Vice-President Research at Choice Broking, is of the opinion that one could buy the stock after it crosses Rs 193. “Once the stock surpasses the breakout level of Rs 193, it has the potential to hit Rs 280 which means about 45 percent upside,” added Parar.

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Considering the recent upswing in the stock, Swapneel Mantri, technical analyst at the institutional desk of Sushil Finance, believes now is the time to book profit at current levels.

Fundamental View

Several market participants have warned about excessive retail participation in the stock which implies high volatility.

“Fundamentally speaking, I have a bullish view on the IT sector and hence Brightcom Group is also likely to do well. Secondly, even as receivables are high, some of the names from which Brightcom is expected to receive payments are decent and trustworthy so there is little concern on that front. Thirdly, zero debt is enticing,” said Purvesh Shelatkar, Head of Institutional Broking, Monarch Networth Capital.

However, he also pointed out that Brightcom shares are trading at an extremely high P/E as compared to bluechip IT stocks such as Tata Consultancy Services where there is scope for P/E expansion. This, along with the sharp upswing in the stock has prompted Shelatkar to suggest booking profit at this stage.

Brightcom Group shares are trading at a stock P/E of 2,175 currently, as per Screener. Price to earnings ratio or P/E is one of the most widely used metrics for investors and analysts to determine whether a company's stock price is overvalued or undervalued.

Many experts believe that Brightcom Group shares are trading at an extremely expensive stock valuation and that the rise in the share price is unjustified.

This is especially because there are several other IT companies in the large, mid and smallcap space that are attractively valued as compared to Brightcom Group. Shares of TCS, Tata Elxsi, Mindtree, NELCO and Newgen Software are trading at a stock P/E of about 40-100, Shelatkar added.

Meanwhile, Koushik Mohan, Fund Manager at Moat PMS, believes that the current valuation is very expensive. He added that “For the nature of business, I don't think 6-7 times of price to sales is justifiable and current internet bull run according to me is helping the company to tread at this levels. But at the same time, Brightcom is also working on its debt payments which is a good indication. To conclude, I would not recommend to hold the stock in my portfolio”.

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(Edited by : Ajay Vaishnav)