Target: ₹1,550
CMP: ₹1,074.65
We initiate coverage on ESDS Software Solution with a ‘Buy’ rating and a TP of ₹1,550, valuing the company at 18x FY28E EV/EBITDA, with a DCF used as a sanity check. In our view, ESDS offers one of the most compelling listed opportunities to gain exposure to India’s structural cloud, data-centre and AI infrastructure build-out, supported by its full-stack capabilities across cloud, managed infrastructure and data-centre services. Growth is underpinned by capacity expansion, deeper customer monetisation and operating leverage, with the $1.25 billion AI contract adding a significant new leg to the earnings trajectory.
We expect Revenue/EBITDA/PAT to grow at 120.9/72.6/81.3 per cent CAGR over FY26–29E, driven by core business momentum and the ramp-up of AI infrastructure revenues. Our 18x FY28E EV/EBITDA valuation implies about 31x FY28E forward P/E, which we believe appropriately reflects ESDS’s strong growth profile. Successful execution and faster ramp-up of the AI contract could provide further upside to earnings and valuation.
Additional AI/large-cohort wins could accelerate earnings, while broader IT-workload migration by large DC customers to ESDS could deepen wallet share and build recurring revenues.
Key risks: AI deal execution, customer concentration, capex intensity and competition risks could delay earnings ramp-up, pressure utilisation, margin and returns.