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Satyam's analyst meeting, first post the 2009
management change, highlighted the stabilising
business/operating profile.
Revenue momentum is strong; improving large deal bid
participation could reflect in financials by 4QFY12.
Room to improve margin further but expansion post the
sharp jump in 4QFY11 could be slow.
Our May-11 upgrade theme ‘volume recovery = margin
expansion, best played organically’ remains on track.
Reiterate OUTPERFORM with 19% potential upside
Deal traction is on an uptrend. Management commented
on improving deal participation as well as higher win rates
post publication of financials in November 2010. Also, frontend sales-force re-build is close to completion and it sees
return of accounts who had left post 2008/9 crisis. While it is
insistently following large deal opportunities, Satyam
expects medium-term revenue growth to be mainly driven
by growing existing/newly acquired relationships given the
typical long sales cycles in large deals. We see no risk to
our 20% FY12 US$ revenue growth forecast.
Volume recovery key to margin upside. Broad-basing of
employee pyramid is the key structural margin lever (20%
<3 years/54% <6 years experience versus 40%/~60% for
larger peers). Near-to-mid -term, realisation growth through
staff rationalisation in fixed price projects and G&A leverage
are the key levers. We estimate EBITDA margins at 13.4%/
15.2% (+459bp/174bp) for FY12/13.
Merger with TechM by mid-2012? Post settlement of most
legal liabilities, restatement of US GAAP financials remains
the key hurdle to the TechM-Satyam merger (see our note
Satyam: Time to put back on the radar dated 17 May 2011).
Management stated that it is actively negotiating with the
SEC and expects the merger closure 6-9 months post clarity
(by May 2012 at the earliest).
Reiterate our turnaround theme for 19% upside. With our
thesis for a market valuation merger ratio, we prefer a direct
play on the volume growth/margin recovery theme. We
retain our OUTPERFORM rating. Our PER-based PT of
Rs100 (15x FY13F EPS) implies 10%/ 27% discount to
HCLT/TCS
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Satyam's analyst meeting, first post the 2009
management change, highlighted the stabilising
business/operating profile.
Revenue momentum is strong; improving large deal bid
participation could reflect in financials by 4QFY12.
Room to improve margin further but expansion post the
sharp jump in 4QFY11 could be slow.
Our May-11 upgrade theme ‘volume recovery = margin
expansion, best played organically’ remains on track.
Reiterate OUTPERFORM with 19% potential upside
Deal traction is on an uptrend. Management commented
on improving deal participation as well as higher win rates
post publication of financials in November 2010. Also, frontend sales-force re-build is close to completion and it sees
return of accounts who had left post 2008/9 crisis. While it is
insistently following large deal opportunities, Satyam
expects medium-term revenue growth to be mainly driven
by growing existing/newly acquired relationships given the
typical long sales cycles in large deals. We see no risk to
our 20% FY12 US$ revenue growth forecast.
Volume recovery key to margin upside. Broad-basing of
employee pyramid is the key structural margin lever (20%
<3 years/54% <6 years experience versus 40%/~60% for
larger peers). Near-to-mid -term, realisation growth through
staff rationalisation in fixed price projects and G&A leverage
are the key levers. We estimate EBITDA margins at 13.4%/
15.2% (+459bp/174bp) for FY12/13.
Merger with TechM by mid-2012? Post settlement of most
legal liabilities, restatement of US GAAP financials remains
the key hurdle to the TechM-Satyam merger (see our note
Satyam: Time to put back on the radar dated 17 May 2011).
Management stated that it is actively negotiating with the
SEC and expects the merger closure 6-9 months post clarity
(by May 2012 at the earliest).
Reiterate our turnaround theme for 19% upside. With our
thesis for a market valuation merger ratio, we prefer a direct
play on the volume growth/margin recovery theme. We
retain our OUTPERFORM rating. Our PER-based PT of
Rs100 (15x FY13F EPS) implies 10%/ 27% discount to
HCLT/TCS
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