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Mahindra Satyam (Satyam) has enterprise business solutions (EBS) (~40% of
revenue) and manufacturing (~32% of revenue) as its anchor service line and
vertical, respectively, which are showing strong traction. Hence, we expect Satyam
to grow at a revenue CAGR of 19.4%, in-line with its peers, over FY2011-13E.
Satyam has adequate margin levers such as 1) employee pyramid rationalisation,
2) strong volume growth expected on the back of a strengthening deal pipeline
expected to improve utilisations to 75% by FY2013 from the current 74%, 3) better
pricing on the back of improvement in business mix and 4) current SGA at 20.5%
of sales, which can be brought down to 19.0% by FY2013.
We expect Satyam to maintain its growth momentum as recorded over the past few
quarters and grow at rates comparable to its peers at a 19.4% CAGR in USD
revenue and a 32.5% CAGR in earnings over FY2011-13E. At the CMP of `76, the
stock is trading at 10.2x FY2013E EPS of `7.4 i.e., at a PEG of 0.31x. We value the
stock at 40% discount to Infosys' target FY2013 PE i.e., 12.0x. We recommend
Satyam as one of our top picks with a target price of `89.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Mahindra Satyam (Satyam) has enterprise business solutions (EBS) (~40% of
revenue) and manufacturing (~32% of revenue) as its anchor service line and
vertical, respectively, which are showing strong traction. Hence, we expect Satyam
to grow at a revenue CAGR of 19.4%, in-line with its peers, over FY2011-13E.
Satyam has adequate margin levers such as 1) employee pyramid rationalisation,
2) strong volume growth expected on the back of a strengthening deal pipeline
expected to improve utilisations to 75% by FY2013 from the current 74%, 3) better
pricing on the back of improvement in business mix and 4) current SGA at 20.5%
of sales, which can be brought down to 19.0% by FY2013.
We expect Satyam to maintain its growth momentum as recorded over the past few
quarters and grow at rates comparable to its peers at a 19.4% CAGR in USD
revenue and a 32.5% CAGR in earnings over FY2011-13E. At the CMP of `76, the
stock is trading at 10.2x FY2013E EPS of `7.4 i.e., at a PEG of 0.31x. We value the
stock at 40% discount to Infosys' target FY2013 PE i.e., 12.0x. We recommend
Satyam as one of our top picks with a target price of `89.
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