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UBS Investment Research
Patni Computer Systems
3 Q11 results beat estimates
Event: revenue and net profit ahead of estimates
Patni reported 3Q revenue of Rs9.4bn, 14% QoQ growth, 8% above our estimate.
The underlying dollar revenue was $191mn, (up 3.9% QoQ) higher than our
estimate of $188mn. Consolidated EBITDA margins were at 17.6% due to
favourable currency and lower operating expenses. Net profit was Rs835mn (vs
108mn in 2Q), ahead of our estimate led by lower tax rate of 11% vs. our estimate
of 27%.
Impact: margin expansion due to absence of one-off costs in 3Q
Patni reported operating margin of 17.6% in 3Q versus 1.9% in the last quarter.
The increase was primarily due to absence of one-time costs such as stock based
compensation and severance expenses. Higher employee utilisation at 78% also
boosted the margin in 3Q.
Action: corporate action likely to drive the share price
Successful completion of Patni-iGate merger is likely to provide near-term revenue
visibility for Patni. In addition, any corporate action clarity from iGate to delist the
company or reduce its stake in Patni to 75% (currently 82%) may act as a catalyst
in the near-term.
Valuation: revisiting our estimates
We maintain Sell and price target of Rs250, which is derived from a DCF-based
methodology and explicitly forecast long-term valuation drivers using UBS’s
VCAM tool.
Patni Computer Systems
Incorporated in 1978, Patni Computer Systems (Patni) is one of the leading
India-based providers of IT services. It has over 14,000 employees across 29
centres across the world. Patni offers services in application development and
maintenance, enterprise solutions and other IT-enabled services. It derives most
of its revenue from the US and the rest from EMEA and Asia. Its main verticals
are insurance, manufacturing and retail, and product engineering.
Statement of Risk
A sharp decline in IT Services spending could result in downward revision of
our earnings estimates.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
UBS Investment Research
Patni Computer Systems
3 Q11 results beat estimates
Event: revenue and net profit ahead of estimates
Patni reported 3Q revenue of Rs9.4bn, 14% QoQ growth, 8% above our estimate.
The underlying dollar revenue was $191mn, (up 3.9% QoQ) higher than our
estimate of $188mn. Consolidated EBITDA margins were at 17.6% due to
favourable currency and lower operating expenses. Net profit was Rs835mn (vs
108mn in 2Q), ahead of our estimate led by lower tax rate of 11% vs. our estimate
of 27%.
Impact: margin expansion due to absence of one-off costs in 3Q
Patni reported operating margin of 17.6% in 3Q versus 1.9% in the last quarter.
The increase was primarily due to absence of one-time costs such as stock based
compensation and severance expenses. Higher employee utilisation at 78% also
boosted the margin in 3Q.
Action: corporate action likely to drive the share price
Successful completion of Patni-iGate merger is likely to provide near-term revenue
visibility for Patni. In addition, any corporate action clarity from iGate to delist the
company or reduce its stake in Patni to 75% (currently 82%) may act as a catalyst
in the near-term.
Valuation: revisiting our estimates
We maintain Sell and price target of Rs250, which is derived from a DCF-based
methodology and explicitly forecast long-term valuation drivers using UBS’s
VCAM tool.
Patni Computer Systems
Incorporated in 1978, Patni Computer Systems (Patni) is one of the leading
India-based providers of IT services. It has over 14,000 employees across 29
centres across the world. Patni offers services in application development and
maintenance, enterprise solutions and other IT-enabled services. It derives most
of its revenue from the US and the rest from EMEA and Asia. Its main verticals
are insurance, manufacturing and retail, and product engineering.
Statement of Risk
A sharp decline in IT Services spending could result in downward revision of
our earnings estimates.
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