Buy Allied Digital; target of Rs 125: Choice Institutional Equities

Moneycontrol • 1 day ago

Original source

Key Investment Pillars

  • Recurring services growth: Allied Digital Services (ALDS) reported 31% YoY growth in services revenue, driven by strong traction in international markets and managed services.
  • International expansion: ROW revenue increased 35% YoY, supported by major US engagements, including AI-powered healthcare Service Desk and offshore IT/cybersecurity partnerships.
  • Margin improvement: ALDS reported EBITDA margin of 10%, with a focus on improving resource utilization, scaling managed services, and embedding AI-led automation across delivery operations.
  • Government market stabilization: Hardware prices have stabilized, supporting renewed government ordering activity, with key wins including Maharashtra's MIDC ILL Connectivity project.

Thesis Validation Checklist

To validate the investment thesis, watch for:

  • Sustained growth in recurring services: Continued traction in international markets and managed services.
  • Improved margin performance: Gradual improvement in EBITDA margin driven by operational efficiencies and AI-led automation.
  • Government project execution: Recovery in government-led project execution and conversion of sizeable projects.
  • International market expansion: Further acceleration in ROW revenue growth, driven by US engagements and other international markets.