Dynacon Systems and Solutions - Buy

Business Model:

Dynacon Systems and Solutions is an end to end IT Infrastructure solutions provider. The Company undertakes all activities related to IT infrastructure including infrastructure design and consulting services, turnkey systems integration of large network and data centre infrastructures including supply of associated equipment and software; on-site and remote facilities management of multi- location infrastructure of domestic clients. Its Enterprise Services offerings include a wide spectrum of Enterprise IT and Office Automation Services including Infrastructure Managed Services, Breakfix Services, Managed Print Services, Cloud Computing, Systems Integration Services, and Applications.

The key verticals driving growth for the company are - BFSI, Education, and the Government sector. Company has recently entered into several new strategic partnerships with Global IT Companies like Oracle, Aruba, Riverbed. Company has added several key customers in these segments towards managing their IT Infrastructure and Networking for their offices and branches. Dynacons has bagged the Managed Services order for Maharashtra Co-op Bank for managing their Data Centre and Disaster Recovery Centre for a period of 3 years.It has also undertaken several solution deployments such as Reserve Bank of India, State Bank of India, Central Bank, Bank of India, CGGVeritas, Breach Candy Hospital, etc. Company received recognition as the Emerging IT Infrastructure Services Company by CIO Choice. Link to various customers of the company is here.

The System Integration (SI) segment is the main contributor to the revenue growth for the company. Dynacon has also collaborated with large System Integrators for working together on large projects. In FY 14 , it won projects with Tata Consultancy Services and Atos.

The adoption of Social media, Mobile, Analytics and Cloud (SMAC) technologies is expected to drive growth in all the segments. Cloud and client maturity are the major drivers for this, especially in IT. Dynacons is adapting this technology for upgrading its existing solutions as part of its offerings.

Expected opening up of  infrastructure sectors like roads, airports and sea ports, national e-Governance initiatives and implementation of Mission projects, is going to drive an increase in IT spend. This presents unprecedented opportunity for growth for the company.

Company derives more than 15% of its revenue from Storage space, which has grown at a pace of 25% YOY for last 3 – 5 years. Company has adopted revolutionary Software Defined Strorage (SDS) in the enterprise technology space. This is an upcoming technology in this segment and article on company’s promoters this was printed on the cover page of Channel World Magazine September 2014. Link here

SDS Technology provides the following benefits over the traditional data storage method:

• Flexibility—Hardware-defined storage solutions are rigid, proprietary systems that lock you into specific vendors and protocols. By contrast,software-defined storage tends to be based on open systems that are much more adaptable to changing needs and that allow you to mix and match storage layers for optimal cost effectiveness.

• Scalability—Software-defined solutions provide immediacy and relatively limitless scalability. To scale a hardware-based system requires the time and money and floor space of buying—installing—configuring the hardware. To scale a software-defined system, on the other hand, requires just a couple of software commands.

• Economy—When considering the real cost of ownership (RCO), software-defined storage reduces the cost of buying new gear, the cost of operating the equipment, and even the cost of disposal fees. Taken together, the cumulative effect of all these cost reductions can generate savings as large as 70% or more.

• Resource leveragability—With the operational simplicity of software-defined storage, businesses don’t have to maintain engineering overhead to develop separate solutions for different hardware and media, thereby allowing IT departments to focus more resources on strategic business issues.

Source:

I feel that with supernormal explosion in data these days and to save every bit of it would compel organizations to go for SDS technology and will benefit Dynacon going forward.

A snapshot of various parameters considered for arriving at a buying decision.

Rs Crs	2011	2012	2013	2014	Q1 FY 15	Q2 FY 15	Remarks
Net Sales	42.33	52.2	58.7	77.65	22.6		Growing Topline
Net Profit	0.77	1.03	0.52	0.58	0.16		NPM should improve going forward
Market Cap				5.62
Market Cap / Sales				0.07			Market cap of around 7% of sales.
Book Value				27.66
Current Price				9.48
CMP / Book Value				0.34			Trading at 34% of its book value.
Promoter Holding	29.67%	29.67%	29.67%	30.09%	31.09%	31.49%	Increasing gradually.

Please have your own due diligence before buying.

I am invested in this stock.

Happy Investing!