Report
Svetlana Sukhanova

CEE IT - A Matter of Price

After a transfer of IT sector coverage, we reinitiate coverage of Luxoft and EPAM Systems, two CEE IT companies operating in the sweet spot of the expanding IT outsourcing and offshoring service industry. Our top pick is Luxoft, which we rate as a BUY with a target price of $61.89 per share. It is trading at a calendar year 2019E P/E of 15.5, which represents a 20% discount to global peers. We consider this to be unjustified given its growth outlook (we see non-GAAP EPS expanding at a 31% CAGR in fiscal 2019E-21E). We think the worst could be behind it and that the risks are priced in at this stage. We rate EPAM Systems a HOLD with a target price of $142 per share and believe it is fairly valued at a 40% premium to global peers.
Underlyings
EPAM Systems Inc.

Epam Systems is a provider of software product development and digital platform engineering services to customers located around the world, primarily in North America, Europe, Asia and Australia. The company's industry services include financial services, travel and consumer, software and hi-tech, business information and media, life sciences and healthcare, as well as other industries.

Luxoft Holding Inc. Class A

Provider
Sberbank
Sberbank

​Sberbank CIB Investment Research is a research firm offering equity, fixed income, economics, and strategy research. It covers analysis on all aspects of Russia’s capital markets, issues and industries. The firm analyzes trends in Russia and combines local knowledge with a global perspective. It processes macroeconomic data, market and company-specific news, stock quotes and other information for providing research reports. The firm provides details and latest prices on the most traded names and most traded paper on all segments Russian market. In strategy research, it provides thematic research, tips and descriptions of the methodology used to evaluate companies.

Analysts
Svetlana Sukhanova

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