Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Wait and watch…
Patni Computers reported its Q1CY11 numbers that were ahead of our
estimates helped by one-time revenue recognitions from milestone
achievements. Though the company signed four deals with total contract
value (TCV) size of US$20-30 million, ramp ups continue to be slow and
could take two or three quarters for material revenue contribution.
Further, the management commentary suggests discretionary spending
continues to be low for Patni’s portfolio. Finally, though it expects to save
US$25-30 million in the second year following the transaction, near term
visibility on cost savings remain feeble. We maintain our HOLD rating but
reduce the price target to | 440 (| 465 earlier).
Revenue, EPS modestly ahead of estimates
Patni reported revenues of | 859.4 crore (I-direct estimate: | 839.2
crore) led by 3.7% volume growth. At | 122.5 crore, EBIT was
modestly above our | 119.7 crore estimate resulting in 14.3% EBIT
margin (14.3% our estimate). Patni hired 97 net heads in Q1CY11 vs.
1,086 heads in Q4CY10. LTM attrition continues to remain at
elevated levels of 24.6% vs. 25.2% in Q4CY10. The company would
pay 9-10% offshore and 2-4% onsite wage hikes, effective Q2CY10.
Operating metric highlights
Insurance came in weak and declined 3.7% QoQ while
manufacturing, financial services and product engineering grew 4%,
1.2% and 6.4%, respectively. Telecom saw a demand uptick with
29.7% QoQ and 9.5% YoY growth.
Valuation
We are adjusting our CY11 EPS estimate to | 41.5 vs. | 40.6 earlier while
maintaining our CY12 estimates. Thus, we expect revenues to grow at
~10% CAGR during CY10-CY12E. We believe Patni-iGate synergies are a
few quarters away during which the company could likely report tepid
revenue and earnings growth. Consequently, we have lowered our target
multiple to 10.3x vs. 10.9x earlier to value Patni at | 440 (| 465) earlier and
maintain our HOLD rating.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Wait and watch…
Patni Computers reported its Q1CY11 numbers that were ahead of our
estimates helped by one-time revenue recognitions from milestone
achievements. Though the company signed four deals with total contract
value (TCV) size of US$20-30 million, ramp ups continue to be slow and
could take two or three quarters for material revenue contribution.
Further, the management commentary suggests discretionary spending
continues to be low for Patni’s portfolio. Finally, though it expects to save
US$25-30 million in the second year following the transaction, near term
visibility on cost savings remain feeble. We maintain our HOLD rating but
reduce the price target to | 440 (| 465 earlier).
Revenue, EPS modestly ahead of estimates
Patni reported revenues of | 859.4 crore (I-direct estimate: | 839.2
crore) led by 3.7% volume growth. At | 122.5 crore, EBIT was
modestly above our | 119.7 crore estimate resulting in 14.3% EBIT
margin (14.3% our estimate). Patni hired 97 net heads in Q1CY11 vs.
1,086 heads in Q4CY10. LTM attrition continues to remain at
elevated levels of 24.6% vs. 25.2% in Q4CY10. The company would
pay 9-10% offshore and 2-4% onsite wage hikes, effective Q2CY10.
Operating metric highlights
Insurance came in weak and declined 3.7% QoQ while
manufacturing, financial services and product engineering grew 4%,
1.2% and 6.4%, respectively. Telecom saw a demand uptick with
29.7% QoQ and 9.5% YoY growth.
Valuation
We are adjusting our CY11 EPS estimate to | 41.5 vs. | 40.6 earlier while
maintaining our CY12 estimates. Thus, we expect revenues to grow at
~10% CAGR during CY10-CY12E. We believe Patni-iGate synergies are a
few quarters away during which the company could likely report tepid
revenue and earnings growth. Consequently, we have lowered our target
multiple to 10.3x vs. 10.9x earlier to value Patni at | 440 (| 465) earlier and
maintain our HOLD rating.
No comments:
Post a Comment