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Rolta’s reported Q3FY11 result in line with our expectation. Revenue was in‐line with
our expectation, whereas, margins were ahead. The company maintained their
revenue guidance of 18% YoY growth. We reiterate our ‘Accumulate’ rating, with a
revised target price of Rs160, a downward revision of 5% due to multiple revision.
Revenue in line but margins ahead: Rolta reported revenue growth of 4.3%
QoQ to Rs4.60bn (PLe: Rs4.57bn, Cons: Rs4.51bn). EBITDA margin expanded by
38bps QoQ to 39.8% (PLe: 39.2%), driven by EBITDA margin expansion in EGIS
vertical by 63bps QoQ. EPS grew by 7.6% QoQ (excl. Rs76.1cr of one‐time gain)
to Rs5.22 (PLe Rs4.70), due to higher‐than‐expected other income at Rs107.5m
(Q2FY11: Rs21.5m, PLe: Rs25.4m).
Strong order book growth improved confidence in guidance: Order book grew
by 7.2% QoQ to Rs20.4bn, strongest growth in the last ten quarters. Order book
growth was driven by high margin business EGIS (10.6% QoQ). Also, 65‐70% of
the book is driven by solution business; hence, improving visibility for high 30s
EBITDA margin for FY11. However, the management guided for tax rate of 14‐
15% for FY12 and moving higher in FY13.
Other highlights: 1) Growth guidance for FY11 revenue 16‐18% with profit
growth of 25% 2) Cash: Rs1bn, Debt Rs13bn 3) Q3FY11‐ FCF: Rs40cr, Capex:
Rs75cr, Cash flow from operation: Rs115cr 3) IP revenue for Q3FY11: 14% (9M:
16%) 4) Interest rate on debt 7% 5) Tax rate FY12 – 16‐18% 6) S&M cost has
gone up by 25‐30% YoY as the company hired more domain consultants
Valuation and Recommendation – ‘Accumulate’, Revise target price to Rs160:
We believe that the improving order book has improved the visibility of revenue
guidance. We revise our multiple to 9 from 10 (in‐line with discount to larger
peers); however, retain our ‘Accumulate’ rating, with a revised target price of
Rs160 (Old Rs170), 9xMar12e earnings estimates.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Rolta’s reported Q3FY11 result in line with our expectation. Revenue was in‐line with
our expectation, whereas, margins were ahead. The company maintained their
revenue guidance of 18% YoY growth. We reiterate our ‘Accumulate’ rating, with a
revised target price of Rs160, a downward revision of 5% due to multiple revision.
Revenue in line but margins ahead: Rolta reported revenue growth of 4.3%
QoQ to Rs4.60bn (PLe: Rs4.57bn, Cons: Rs4.51bn). EBITDA margin expanded by
38bps QoQ to 39.8% (PLe: 39.2%), driven by EBITDA margin expansion in EGIS
vertical by 63bps QoQ. EPS grew by 7.6% QoQ (excl. Rs76.1cr of one‐time gain)
to Rs5.22 (PLe Rs4.70), due to higher‐than‐expected other income at Rs107.5m
(Q2FY11: Rs21.5m, PLe: Rs25.4m).
Strong order book growth improved confidence in guidance: Order book grew
by 7.2% QoQ to Rs20.4bn, strongest growth in the last ten quarters. Order book
growth was driven by high margin business EGIS (10.6% QoQ). Also, 65‐70% of
the book is driven by solution business; hence, improving visibility for high 30s
EBITDA margin for FY11. However, the management guided for tax rate of 14‐
15% for FY12 and moving higher in FY13.
Other highlights: 1) Growth guidance for FY11 revenue 16‐18% with profit
growth of 25% 2) Cash: Rs1bn, Debt Rs13bn 3) Q3FY11‐ FCF: Rs40cr, Capex:
Rs75cr, Cash flow from operation: Rs115cr 3) IP revenue for Q3FY11: 14% (9M:
16%) 4) Interest rate on debt 7% 5) Tax rate FY12 – 16‐18% 6) S&M cost has
gone up by 25‐30% YoY as the company hired more domain consultants
Valuation and Recommendation – ‘Accumulate’, Revise target price to Rs160:
We believe that the improving order book has improved the visibility of revenue
guidance. We revise our multiple to 9 from 10 (in‐line with discount to larger
peers); however, retain our ‘Accumulate’ rating, with a revised target price of
Rs160 (Old Rs170), 9xMar12e earnings estimates.
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