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License fees declined 42% qoq on inherent product
business volatility given push out of deal closures to 3Q12
with AMC revenue (-9% qoq) also impacted by delayed
bookings; IT services business restructuring continues.
Consolidated margins expanded 61bp qoq despite 15%
offshore wage hike aided by 8% INR depreciation, flow
through BPO revenue and increased IT services offshoring.
We believe continued product business hiring (7% qoq) is
an indicator of strong growth visibility despite muted 2Q
signings (US$9m); management indicated robust pipeline
and expects to match FY11 license revenue growth.
Retain Outperform with no changes to our estimates.
2Q12 – muted growth on product volatility. Consolidated
revenue was up 1.7% yoy to Rs7.6bn on muted 4.3% yoy
product growth and continued paring down of services business
(-5.3% qoq). BPO revenue grew 74% qoq on flow through of
US$1.2m from 1Q12 non-booking. Management attributed the
sequential decline in license fees (-42% qoq) and AMC revenue
(-9% qoq) to push out of deal closures/booking to early 3Q12.
Implementation fees grew robustly at 29% qoq following
healthy license sales (US$106m) over the last six quarters.
Margin uptrend continues. Consol. EBITDA margin expanded
61bp qoq despite an above average 15% offshore wage hike,
aided by INR depreciation. Product margin declined 176bp qoq
on higher share of implementation while services margin grew
195bp qoq on higher offshoring (+700bp qoq) with BPO margin
rebounding 47% qoq on flow through revenues. The company
made provisions for Rs866m during 2Q12 for an existing
Rs5.6bn claim filed by an Irish banking client undergoing
restructuring. Management does not expect further provisions
going forward. PAT (ex-exceptional provision) was up 31% qoq.
Strong pipeline in place. Management indicated that current
pipeline for deals closing over the next two quarters is stronger
compared to last year. It commented on good traction in North
America across analytics and core banking offerings and
expects to match FY11 license revenue growth (26%). We see
continued strong product headcount addition (7.4% qoq) as an
indicator of visibility on product growth.
Retain Outperform. Despite quarterly volatility, given strong
pipeline, we maintain our 18% FY12 license revenue growth
outlook. We reiterate our theme of “growing license sales +
higher AMC business = margin upside + improved cash-flows”.
We maintain our estimates and price target of Rs2,550.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
License fees declined 42% qoq on inherent product
business volatility given push out of deal closures to 3Q12
with AMC revenue (-9% qoq) also impacted by delayed
bookings; IT services business restructuring continues.
Consolidated margins expanded 61bp qoq despite 15%
offshore wage hike aided by 8% INR depreciation, flow
through BPO revenue and increased IT services offshoring.
We believe continued product business hiring (7% qoq) is
an indicator of strong growth visibility despite muted 2Q
signings (US$9m); management indicated robust pipeline
and expects to match FY11 license revenue growth.
Retain Outperform with no changes to our estimates.
2Q12 – muted growth on product volatility. Consolidated
revenue was up 1.7% yoy to Rs7.6bn on muted 4.3% yoy
product growth and continued paring down of services business
(-5.3% qoq). BPO revenue grew 74% qoq on flow through of
US$1.2m from 1Q12 non-booking. Management attributed the
sequential decline in license fees (-42% qoq) and AMC revenue
(-9% qoq) to push out of deal closures/booking to early 3Q12.
Implementation fees grew robustly at 29% qoq following
healthy license sales (US$106m) over the last six quarters.
Margin uptrend continues. Consol. EBITDA margin expanded
61bp qoq despite an above average 15% offshore wage hike,
aided by INR depreciation. Product margin declined 176bp qoq
on higher share of implementation while services margin grew
195bp qoq on higher offshoring (+700bp qoq) with BPO margin
rebounding 47% qoq on flow through revenues. The company
made provisions for Rs866m during 2Q12 for an existing
Rs5.6bn claim filed by an Irish banking client undergoing
restructuring. Management does not expect further provisions
going forward. PAT (ex-exceptional provision) was up 31% qoq.
Strong pipeline in place. Management indicated that current
pipeline for deals closing over the next two quarters is stronger
compared to last year. It commented on good traction in North
America across analytics and core banking offerings and
expects to match FY11 license revenue growth (26%). We see
continued strong product headcount addition (7.4% qoq) as an
indicator of visibility on product growth.
Retain Outperform. Despite quarterly volatility, given strong
pipeline, we maintain our 18% FY12 license revenue growth
outlook. We reiterate our theme of “growing license sales +
higher AMC business = margin upside + improved cash-flows”.
We maintain our estimates and price target of Rs2,550.
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