1 hr ago
Choice sees 42% upside in ESDS amid AI expansion
Choice Institutional Equities has started studying ESDS Software Solution and is positive about its future.
It gave the stock a buy rating and a target price of Rs 1,550.
The brokerage believes India will need much more cloud and artificial-intelligence infrastructure.
ESDS provides services such as cloud computing, data-centre space and GPU-based infrastructure.
Choice said ESDS is serving many government and banking customers.
It also pointed to a $1.25 billion AI infrastructure contract with Sharon AI.
The brokerage expects ESDS’s revenue to rise sharply over the next few years.
However, it warned that execution problems, heavy spending, customer concentration and competition could hurt the company.
Choice Institutional Equities initiated coverage of ESDS Software Solution with a buy rating and a Rs 1,550 target price.
The brokerage expects India’s cloud market to grow from Rs 65,100 crore to Rs 1.9 lakh crore by FY30.
ESDS could benefit from demand for cloud, GPUaaS, colocation, managed infrastructure and SaaS services.
Choice cited improving margins, customer retention and ESDS’s $1.25 billion AI infrastructure contract with Sharon AI.
Execution, customer concentration, capital spending and competition remain key risks to the growth outlook.
- Who
- Choice Institutional Equities and ESDS Software Solution.
- What
- Choice initiated coverage of ESDS with a buy rating and projected 42% upside to a Rs 1,550 target price.
- Where
- India’s cloud and AI infrastructure market.
- When
- The target was compared with Monday’s stock levels; financial projections cover FY26 through FY29E.
- Why
- Choice expects enterprise digitisation, banking and financial-services demand, government workloads, data-residency requirements and AI expansion to drive growth.
Growth case
Risk case
Market opportunity
Growth case
Choice expects strong expansion in India’s cloud and AI infrastructure markets, supported by enterprise digitisation, BFSI demand and government workloads.
Risk case
The growth outlook depends on ESDS successfully capturing projected demand amid competition and broader workload migration.
AI contract and execution
Growth case
The $1.25 billion Sharon AI contract and planned deployment of about 8,208 NVIDIA B300 GPUs could become major growth triggers.
Risk case
Choice identified execution and capex intensity as risks, particularly as ESDS plans Rs 570 crore in capital expenditure.
Customer expansion
Growth case
ESDS’s integrated services are deepening customer relationships, with customers using all three core services rising from 62% in FY24 to 89% in FY26 and revenue retention at 94.9%.
Risk case
Customer concentration remains a stated risk, meaning reliance on particular customers could affect performance.
Key facts
- Brokerage view
- Buy rating from Choice Institutional Equities
- Target price
- Rs 1,550, implying 42% upside from Monday’s levels
- India cloud-market outlook
- Expected to grow at a 23.6% CAGR from Rs 65,100 crore to Rs 1.9 lakh crore by FY30
- AI infrastructure contract
- ESDS has a $1.25 billion contract with Sharon AI
- Expected revenue
- Rs 470 crore in FY26, Rs 2,260 crore in FY27E and Rs 4,580 crore in FY28E
- Planned capex
- Rs 570 crore, with about 70% front-loaded in FY27E
- Customer base
- 115 BFSI institutions and 104 government clients
Sources
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