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¾ Patni reported marginally better than expected revenues at
~US$ 190mn (+4% QoQ), (V/s. est. US$ 189.6 mn). Op Mgns at
17.3% were up by ~ 20 bps QoQ (V/s. est. ~90 bps increase)
¾ Profits at Rs. 1.2bn (-33.3% QoQ driven by one time prov.
w/back (~Rs. 330 mn) in Dec 10 qtr) was lower than est. Rs.
1.3 bn due to higher tax rate at 28%. (V/s. est. 19%)
¾ Growth driven by Europe (+34% QoQ) and non top 10 clients
(+10% QoQ) whereas America remained muted (-0.9% QoQ)
and Top /Top 5/Top 10 clients at ~ -5%/-2%/-3% sequentially
¾ Cut CY11/12E earnings by ~4.8%/4.6% to Rs 33.6/38.5 as we
pare down our margin assumptions to ~17.5% (V/s 18%
earlier)
In line revenues, margin pressures continue
Patni reported marginally better than expected revenues at US$ 190.3 mn (+4% QoQ,
+10.4% YoY), V/s. Emkay estimates at US$ 189.6mn. However co indicated during the
investor call that revenue growth was helped by milestone revenues (1% QoQ). Op
Mgns were up by ~20 bps QoQ V/s. expectation of ~90 bps improvement. Profits at Rs
1.2bn (-33.3% QoQ driven by one time provision write back (~Rs. 330 mn) in Dec 10
qtr) was lower than est. Rs. 1.3 bn impacted by higher tax rate at 28%. (V/s. est. 19%).
incremental revenues were primarily driven by Europe (+ 34% QoQ) and APAC (+14%
sequentially). Amongst service offerings, Package implementation reported strong
growth at 21% QoQ while Product engineering /IMS/BPO grew by 5.6%/10.3%/7.1%
QoQ. While Non top 10 client revenues grew by 10% QOQ, revenues from Top 5/Top
10 clients declined by ~2%/3% sequentially.
Attrition remains to be high, wage increments to be lower than industry
Overall headcount addition was muted at 97 (Q1CY11 end headcount at 17,739) and
with LTM attrition continuing to remain alarmingly high at 24.6 (although down from
25.2% in Dec’10 quarter). In our view, supply side headwinds remain stiff for the
company and in that context we believe that 9-10% offshore wage increments might end
up being at the lower end. We believe that the company would find it difficult to
maintain EBIT margins within it’s stated range of 15-17% going forward and hence
build in EBIT margins at 14.3%/14.4% for CY11/12 respectively.
Cutting CY11/12E earnings by ~4.8%/4.6% to Rs 33.6/38.5
While we tweak our CY11/12 revenue estimates marginally, we pare down our earnings
estimates by ~4.8%/4.6% to Rs 33.6/38.5 respectively as we build in lower EBITDA
margins to 17.5% (V/s 18% earlier). In our view growth issues would continue to dog the
company as integration on sales and delivery remain focus areas for the management
in the near to medium term.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
¾ Patni reported marginally better than expected revenues at
~US$ 190mn (+4% QoQ), (V/s. est. US$ 189.6 mn). Op Mgns at
17.3% were up by ~ 20 bps QoQ (V/s. est. ~90 bps increase)
¾ Profits at Rs. 1.2bn (-33.3% QoQ driven by one time prov.
w/back (~Rs. 330 mn) in Dec 10 qtr) was lower than est. Rs.
1.3 bn due to higher tax rate at 28%. (V/s. est. 19%)
¾ Growth driven by Europe (+34% QoQ) and non top 10 clients
(+10% QoQ) whereas America remained muted (-0.9% QoQ)
and Top /Top 5/Top 10 clients at ~ -5%/-2%/-3% sequentially
¾ Cut CY11/12E earnings by ~4.8%/4.6% to Rs 33.6/38.5 as we
pare down our margin assumptions to ~17.5% (V/s 18%
earlier)
In line revenues, margin pressures continue
Patni reported marginally better than expected revenues at US$ 190.3 mn (+4% QoQ,
+10.4% YoY), V/s. Emkay estimates at US$ 189.6mn. However co indicated during the
investor call that revenue growth was helped by milestone revenues (1% QoQ). Op
Mgns were up by ~20 bps QoQ V/s. expectation of ~90 bps improvement. Profits at Rs
1.2bn (-33.3% QoQ driven by one time provision write back (~Rs. 330 mn) in Dec 10
qtr) was lower than est. Rs. 1.3 bn impacted by higher tax rate at 28%. (V/s. est. 19%).
incremental revenues were primarily driven by Europe (+ 34% QoQ) and APAC (+14%
sequentially). Amongst service offerings, Package implementation reported strong
growth at 21% QoQ while Product engineering /IMS/BPO grew by 5.6%/10.3%/7.1%
QoQ. While Non top 10 client revenues grew by 10% QOQ, revenues from Top 5/Top
10 clients declined by ~2%/3% sequentially.
Attrition remains to be high, wage increments to be lower than industry
Overall headcount addition was muted at 97 (Q1CY11 end headcount at 17,739) and
with LTM attrition continuing to remain alarmingly high at 24.6 (although down from
25.2% in Dec’10 quarter). In our view, supply side headwinds remain stiff for the
company and in that context we believe that 9-10% offshore wage increments might end
up being at the lower end. We believe that the company would find it difficult to
maintain EBIT margins within it’s stated range of 15-17% going forward and hence
build in EBIT margins at 14.3%/14.4% for CY11/12 respectively.
Cutting CY11/12E earnings by ~4.8%/4.6% to Rs 33.6/38.5
While we tweak our CY11/12 revenue estimates marginally, we pare down our earnings
estimates by ~4.8%/4.6% to Rs 33.6/38.5 respectively as we build in lower EBITDA
margins to 17.5% (V/s 18% earlier). In our view growth issues would continue to dog the
company as integration on sales and delivery remain focus areas for the management
in the near to medium term.
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