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Mahindra Satyam (Satyam) reported its 2QFY2012 results, which were lower than
our expectations on the operating front, but stood modest on the net profit front.
The major highlight of the result was 4.5% qoq volume growth with the addition
of 36 new customers during the quarter. The company is back on the growth
track after two years of metamorphosis undertaken by TechMahindra’s
management post its acquisition in June 2009. We continue to maintain our
Accumulate rating on the stock.
Quarterly highlights: For 2QFY2012, Satyam reported USD revenue growth of
3.2% qoq to US$330mn, led by volume growth. In INR terms, revenue came in at
`1,578cr, up by whopping 10.0% qoq. The company’s EBITDA and EBIT margin
increased by 49bp and 63p qoq to 15.3% and 12.8%, respectively, negatively
impacted by higher operational expenses. PAT came in at `238cr, up 5.8% qoq,
aided by higher other income.
Outlook and valuation: The company expects the enterprise business solutions
(EBS) service and the manufacturing vertical to bolster its growth and help it to
track the industry’s growth rate. This is coherent with the demand color given by
managements of most other tier-I companies as well. We expect the company’s
core competence in EBS to supplement growth and post a 15.3% and 15.9%
CAGR in USD and INR revenue, respectively, over FY2011-13E. Also, with
adequate margin levers such as 1) employee pyramid rationalization;
2) improving utilizations and 3) rationalizing SGA expenses, we expect the
company’s EBITDA margin to improve to 14.6% and 15.0% for FY2012 and
FY2013, respectively, from 8.8% in FY2011. At the CMP of `73, the stock is
trading at 10.0x FY2013 EPS of `7.3 i.e., at a PEG of 0.32x. We value the stock
at 40% discount to Infosys’ target FY2013 PE i.e., 11.0x and maintain our
Accumulate rating on the stock with a target price of `80.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Mahindra Satyam (Satyam) reported its 2QFY2012 results, which were lower than
our expectations on the operating front, but stood modest on the net profit front.
The major highlight of the result was 4.5% qoq volume growth with the addition
of 36 new customers during the quarter. The company is back on the growth
track after two years of metamorphosis undertaken by TechMahindra’s
management post its acquisition in June 2009. We continue to maintain our
Accumulate rating on the stock.
Quarterly highlights: For 2QFY2012, Satyam reported USD revenue growth of
3.2% qoq to US$330mn, led by volume growth. In INR terms, revenue came in at
`1,578cr, up by whopping 10.0% qoq. The company’s EBITDA and EBIT margin
increased by 49bp and 63p qoq to 15.3% and 12.8%, respectively, negatively
impacted by higher operational expenses. PAT came in at `238cr, up 5.8% qoq,
aided by higher other income.
Outlook and valuation: The company expects the enterprise business solutions
(EBS) service and the manufacturing vertical to bolster its growth and help it to
track the industry’s growth rate. This is coherent with the demand color given by
managements of most other tier-I companies as well. We expect the company’s
core competence in EBS to supplement growth and post a 15.3% and 15.9%
CAGR in USD and INR revenue, respectively, over FY2011-13E. Also, with
adequate margin levers such as 1) employee pyramid rationalization;
2) improving utilizations and 3) rationalizing SGA expenses, we expect the
company’s EBITDA margin to improve to 14.6% and 15.0% for FY2012 and
FY2013, respectively, from 8.8% in FY2011. At the CMP of `73, the stock is
trading at 10.0x FY2013 EPS of `7.3 i.e., at a PEG of 0.32x. We value the stock
at 40% discount to Infosys’ target FY2013 PE i.e., 11.0x and maintain our
Accumulate rating on the stock with a target price of `80.
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