Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Mahindra Satyam reported its 3QFY2011 numbers, which exceeded the market’s
expectations. Revenue grew by 4.4% qoq to US $284mn (onsite: 41% and
offshore: 59%) from US $272mn in 2QFY2011 on the back of 2.5% qoq volume
growth and due to onsite effort shift with pricing being stable. In rupee terms,
revenue increased by 3.0% qoq to `1,279cr from `1,242cr in 2QFY2011. The
company recorded a significant 249bp qoq improvement in gross margin to
29.0% from 26.5% in 2QFY2011. EBITDA margin increased by 49bp to 6.4%
from 5.9% in 2QFY2011. Margin enhancement came on the back of absorption
of wage hike impact (given in 2QFY2011 of 3% to onsite employees and 15% to
offshore employees) and a significant improvement in utilisation level to 73.5%
from 71% in 2QFY2011. Net profit (excluding exceptional item) came in at
`112cr, reporting growth of 254% qoq on the back of huge other income of
`87cr in 3QFY2011 (`31cr in 2QFY2011), which includes a) forex gain of
`13.4cr, b) profit from sale of a mutual fund investment and c) interest on fixed
deposit. The company generated sizeable cash, taking its cash and cash
equivalent to `3,048cr from `2,996cr in 2QFY2011. Currently, debt in the books
of the company stands at `31cr. Also, the company has got hedges worth
US $386mn with strike rate of `46.9 spanning across the next 24 months.
On the merger of Satyam with Tech Mahindra, management has indicated that
the process will take time and expects it to kick off by mid-CY2011. Also,
w.e.f. March 1, 2011, Mr. Vasant Krishnan will take over as the new CFO of
Mahindra Satyam.
Operating metric highlights: Mahindra Satyam is witnessing strong traction in
service industries, such as banking and financial services, manufacturing
(aerospace, defense and technology) and healthcare, which grew higher than the
company’s average in 3QFY2011. Geography wise, Europe led the company’s
growth, contributing 30% to the company’s revenue; while growth from the US
and Rest of the World was flattish qoq, contributing 52% and 18%, respectively, to
the company’s revenue.
During the quarter, Mahindra Satyam added whopping 764 employees (mostly
lateral intake), taking the total headcount to 28,832. Attrition rate stabilised on
absolute basis but still stands at 25% (quarterly annualised basis). The company
also won three new deals in this quarter – two in Europe and one in the US.
Going forward, Mahindra Satyam is looking to re-engage in large deals
of US $50mn–100mn.
Mahindra Satyam’s client pyramid witnessed qualitative improvement. Clients
contributing greater than US $1mn to revenue increased to 121 from 118 in
2QFY2011; clients contributing greater than US $5mn to revenue increased to 45
from 44 in 2QFY2011; and clients contributing greater than US $10mn to
revenue increased by 3. Among service lines, enterprise solutions, engineering
services and infrastructure management services showed good strength. Total
active client base stood at 217 (active clients are clients who contribute more than
US $100,000/year to revenue). The company plans to do capex of `600cr in the
next six months.
Margin recovery on the cards: Mahindra Satyam is seeking on adding new logos
and has one-third of its sales force dedicated towards it, which is leading to an
increase in S&M expenses. Management is focusing on improving margins by
using levers such as a) growth on the back of building deal pipeline
b) increasing utilisation level c) restructuring the employee pyramid by adding
more freshers (management indicated plans to hire 3,000–3,500 graduates in
CY2011) and d) improving profitability on various engagements.
Overall, results were decent vis-à-vis Tier-1 companies, which also sported
revenue growth of 3–5% qoq. At the CMP of `65, the stock is trading at a PE (x) of
22.6 on FY2011E EPS of `2.9 (annualised).
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Mahindra Satyam reported its 3QFY2011 numbers, which exceeded the market’s
expectations. Revenue grew by 4.4% qoq to US $284mn (onsite: 41% and
offshore: 59%) from US $272mn in 2QFY2011 on the back of 2.5% qoq volume
growth and due to onsite effort shift with pricing being stable. In rupee terms,
revenue increased by 3.0% qoq to `1,279cr from `1,242cr in 2QFY2011. The
company recorded a significant 249bp qoq improvement in gross margin to
29.0% from 26.5% in 2QFY2011. EBITDA margin increased by 49bp to 6.4%
from 5.9% in 2QFY2011. Margin enhancement came on the back of absorption
of wage hike impact (given in 2QFY2011 of 3% to onsite employees and 15% to
offshore employees) and a significant improvement in utilisation level to 73.5%
from 71% in 2QFY2011. Net profit (excluding exceptional item) came in at
`112cr, reporting growth of 254% qoq on the back of huge other income of
`87cr in 3QFY2011 (`31cr in 2QFY2011), which includes a) forex gain of
`13.4cr, b) profit from sale of a mutual fund investment and c) interest on fixed
deposit. The company generated sizeable cash, taking its cash and cash
equivalent to `3,048cr from `2,996cr in 2QFY2011. Currently, debt in the books
of the company stands at `31cr. Also, the company has got hedges worth
US $386mn with strike rate of `46.9 spanning across the next 24 months.
On the merger of Satyam with Tech Mahindra, management has indicated that
the process will take time and expects it to kick off by mid-CY2011. Also,
w.e.f. March 1, 2011, Mr. Vasant Krishnan will take over as the new CFO of
Mahindra Satyam.
Operating metric highlights: Mahindra Satyam is witnessing strong traction in
service industries, such as banking and financial services, manufacturing
(aerospace, defense and technology) and healthcare, which grew higher than the
company’s average in 3QFY2011. Geography wise, Europe led the company’s
growth, contributing 30% to the company’s revenue; while growth from the US
and Rest of the World was flattish qoq, contributing 52% and 18%, respectively, to
the company’s revenue.
During the quarter, Mahindra Satyam added whopping 764 employees (mostly
lateral intake), taking the total headcount to 28,832. Attrition rate stabilised on
absolute basis but still stands at 25% (quarterly annualised basis). The company
also won three new deals in this quarter – two in Europe and one in the US.
Going forward, Mahindra Satyam is looking to re-engage in large deals
of US $50mn–100mn.
Mahindra Satyam’s client pyramid witnessed qualitative improvement. Clients
contributing greater than US $1mn to revenue increased to 121 from 118 in
2QFY2011; clients contributing greater than US $5mn to revenue increased to 45
from 44 in 2QFY2011; and clients contributing greater than US $10mn to
revenue increased by 3. Among service lines, enterprise solutions, engineering
services and infrastructure management services showed good strength. Total
active client base stood at 217 (active clients are clients who contribute more than
US $100,000/year to revenue). The company plans to do capex of `600cr in the
next six months.
Margin recovery on the cards: Mahindra Satyam is seeking on adding new logos
and has one-third of its sales force dedicated towards it, which is leading to an
increase in S&M expenses. Management is focusing on improving margins by
using levers such as a) growth on the back of building deal pipeline
b) increasing utilisation level c) restructuring the employee pyramid by adding
more freshers (management indicated plans to hire 3,000–3,500 graduates in
CY2011) and d) improving profitability on various engagements.
Overall, results were decent vis-à-vis Tier-1 companies, which also sported
revenue growth of 3–5% qoq. At the CMP of `65, the stock is trading at a PE (x) of
22.6 on FY2011E EPS of `2.9 (annualised).
No comments:
Post a Comment