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Polaris Software’s 3QFY11 revenue grew 3% qoq and 18% yoy (in
rupees). Net profit increased 3.3% qoq. However, margin was hit
by the rupee appreciation and employee additions. The company
bagged 17 new deals in the products business in 3QFY11. Other
income stood at `53m and forex gain was `115m. Maintain Buy.
Key points. Geographically, Europe and ROW grew 11% and
25% respectively. Attrition stood at 20% in 3QFY11. Utilization
was 78%, up 200bps qoq. Polaris saw net employee addition of 172
in 3QFY11. The product business contributes 23% to the total
revenue; management is confident that this would reach 26-27% in
next two quarters.
Strong balance sheet and cash-flow to aid business. Polaris has
cash and liquid assets of `5.08bn (`51/share) vis-à-vis `4.8bn in
2QFY11. Debtor days stand at 44.
Change in estimates. We slightly trim our FY11e, FY12e and
FY13e FDEPS 1.4%, 3.7% and 4.6% to account for margin
pressure and increase in tax rates over FY12-13; our new FDEPS
estimates are `19.5, `20.8 and `25.6 respectively.
Valuation and risks. We maintain our target price of `235, which
comprises `200 for core earnings of `17 (FY12e core EPS at 12x,
maintained) and `35 (valuing the cash above the average peer cash
holding). Risks: slowdown in IT spends in the BFSI segment.
India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details �� ��
Polaris Software’s 3QFY11 revenue grew 3% qoq and 18% yoy (in
rupees). Net profit increased 3.3% qoq. However, margin was hit
by the rupee appreciation and employee additions. The company
bagged 17 new deals in the products business in 3QFY11. Other
income stood at `53m and forex gain was `115m. Maintain Buy.
Key points. Geographically, Europe and ROW grew 11% and
25% respectively. Attrition stood at 20% in 3QFY11. Utilization
was 78%, up 200bps qoq. Polaris saw net employee addition of 172
in 3QFY11. The product business contributes 23% to the total
revenue; management is confident that this would reach 26-27% in
next two quarters.
Strong balance sheet and cash-flow to aid business. Polaris has
cash and liquid assets of `5.08bn (`51/share) vis-à-vis `4.8bn in
2QFY11. Debtor days stand at 44.
Change in estimates. We slightly trim our FY11e, FY12e and
FY13e FDEPS 1.4%, 3.7% and 4.6% to account for margin
pressure and increase in tax rates over FY12-13; our new FDEPS
estimates are `19.5, `20.8 and `25.6 respectively.
Valuation and risks. We maintain our target price of `235, which
comprises `200 for core earnings of `17 (FY12e core EPS at 12x,
maintained) and `35 (valuing the cash above the average peer cash
holding). Risks: slowdown in IT spends in the BFSI segment.
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