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B e l o w e s t i m a t e s ; o r d e r b o o k d i s a p p o i n t s …
Rolta reported numbers, which were below our estimates. Rupee
revenues grew 2% QoQ and 13.6% YoY while PAT declined 30% QoQ,
led by a) wage hikes of ~2% onsite and ~11% offshore and b) | 25.9
crore provision made for market-to-market (MTM) losses on foreign
currency loans. Note, reported dollar revenues of $99.3 million declined
5.5% QoQ. This implies that reported rupee revenue growth is primarily
due to rupee depreciation (conversion rate: | 48.9/$). The EGDS business
grew 2% QoQ (in rupees), EITS by 2.1% QoQ while EDOS was the
weakest with 1.6% QoQ (rupee revenues). Rolta’s order book growth
continues to be tepid and grew by a modest 1.4% QoQ. The number of
employees stood at 3,994; a decrease of 88 employees QoQ. We believe
refinancing of FCCBs; due in June 2012, through ECB and rising taxes
could erode profitability. Consequently, we maintain our HOLD rating and
reiterate our view of staying put with large cap names (TCS, Infosys).
ƒ Earnings summary
The company reported revenues of | 485.3 crore (I-direct estimate:
| 491.8 crore) with growth of 2% QoQ. The growth was primarily
due to rupee depreciation and the order book growth continues to
be a concern. Sequentially, EDOS and EITS gross margins declined
280 bps and 470 bps, respectively, while it increased 220 bps QoQ
for the EGIS business. The EBITDA margin declined by 460 bps QoQ
on account of wage hikes, material cost and provision set aside for
FCCBs through depreciation. Bill rates grew by 1.3% QoQ for EDOS
and 2.6% for the ETIS business. FY12E capex stands around | 250-
300 crore wherein | 100 crore would be used for renovation of
existing building while the rest could be use for acquisitions, out of
which | 80 crore has been spent in Q1FY12.
V a l u a t i o n
We expect the company to register revenue/PAT growth of 15/20% CAGR
during FY10-FY12E. That said, we continue to value Rolta based on FY12E
earnings due to the uncertain macroeconomic environment and revenue
visibility. Consequently, we have valued the stock at 3.52x our FY12E EPS
of | 23 i.e. at | 81 and maintain our HOLD rating
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
B e l o w e s t i m a t e s ; o r d e r b o o k d i s a p p o i n t s …
Rolta reported numbers, which were below our estimates. Rupee
revenues grew 2% QoQ and 13.6% YoY while PAT declined 30% QoQ,
led by a) wage hikes of ~2% onsite and ~11% offshore and b) | 25.9
crore provision made for market-to-market (MTM) losses on foreign
currency loans. Note, reported dollar revenues of $99.3 million declined
5.5% QoQ. This implies that reported rupee revenue growth is primarily
due to rupee depreciation (conversion rate: | 48.9/$). The EGDS business
grew 2% QoQ (in rupees), EITS by 2.1% QoQ while EDOS was the
weakest with 1.6% QoQ (rupee revenues). Rolta’s order book growth
continues to be tepid and grew by a modest 1.4% QoQ. The number of
employees stood at 3,994; a decrease of 88 employees QoQ. We believe
refinancing of FCCBs; due in June 2012, through ECB and rising taxes
could erode profitability. Consequently, we maintain our HOLD rating and
reiterate our view of staying put with large cap names (TCS, Infosys).
ƒ Earnings summary
The company reported revenues of | 485.3 crore (I-direct estimate:
| 491.8 crore) with growth of 2% QoQ. The growth was primarily
due to rupee depreciation and the order book growth continues to
be a concern. Sequentially, EDOS and EITS gross margins declined
280 bps and 470 bps, respectively, while it increased 220 bps QoQ
for the EGIS business. The EBITDA margin declined by 460 bps QoQ
on account of wage hikes, material cost and provision set aside for
FCCBs through depreciation. Bill rates grew by 1.3% QoQ for EDOS
and 2.6% for the ETIS business. FY12E capex stands around | 250-
300 crore wherein | 100 crore would be used for renovation of
existing building while the rest could be use for acquisitions, out of
which | 80 crore has been spent in Q1FY12.
V a l u a t i o n
We expect the company to register revenue/PAT growth of 15/20% CAGR
during FY10-FY12E. That said, we continue to value Rolta based on FY12E
earnings due to the uncertain macroeconomic environment and revenue
visibility. Consequently, we have valued the stock at 3.52x our FY12E EPS
of | 23 i.e. at | 81 and maintain our HOLD rating
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