Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Muted HP channel puts pressure on growth
HP channel led to revenue decline - Revenue declined 3%QoQ to
USD265.6mn, below expectation. Rupee revenue grew 4.1%QoQ to
Rs13,672mn. HP channel revenue remained flattish in rupee terms
with 58% contribution but direct channel revenue grew 14.4%QoQ
with 42% contribution, up from 31% contribution from a year back.
EBITDA margin expanded 57bpsQoQ to 18.4%, below our expectation.
PAT was Rs1,848mn, 1%QoQ growth. EPS was Rs8.8, 1%QoQ growth.
Onsite pricing for Applications declines, stable for other towers –
Onsite pricing for applications segment declined 2.9%QoQ to
USD67/hr. All other pricing including offshore and onsite for
Applications, ITO and BPO remained stable. The management
expects no pressure from HP in terms of price negotiation. Overall
pricing is also expected to be stable.
US and Europe decline - In dollar terms, America (65% contribution)
declined 4.5%QoQ, Europe (15% contribution) declined 9.1%QoQ and
Emerging Markets (20% contribution) grew 7.7%QoQ.
All service lines decline except IMS - In rupee terms, Application
maintenance (32% contribution) grew 1.8%QoQ, application
development (28% contribution) grew 4.6%QoQ, IMS (24%
contribution) grew 11.9%. Technical help desk (5% contribution)
declined 16%QoQ and customer service (5% contribution) declined
3.3%QoQ.
Employee headcount declines; robust new client addition – Total
headcount declined 4%QoQ to 38,798. Utilisation (including trainees)
for Application, BPO and ITO grew 100bpsQoQ each to 77%, 71% and
81% respectively. Added 28 new clients (17 from direct channel and
11 from HP channel). Top client declined 3%QoQ, top 10 clients
declined 3%QoQ.
Outlook and Recommendation – Q1FY12 financials are below
expectations with higher than expected decline from HP. As HP is
not performing well in its Enterprise Solutions segment, we expect
pressure on revenue growth in MphasiS as well with a risk of pricing
cut in future. The stock was at attractive valuations after the last
quarter’s earnings and it has given 37% absolute returns. We
downgrade the recommendation from BUY to ‘REDUCE’ with a target
price of Rs400 based on 10x PER multiple on 18-months forward
earnings.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Muted HP channel puts pressure on growth
HP channel led to revenue decline - Revenue declined 3%QoQ to
USD265.6mn, below expectation. Rupee revenue grew 4.1%QoQ to
Rs13,672mn. HP channel revenue remained flattish in rupee terms
with 58% contribution but direct channel revenue grew 14.4%QoQ
with 42% contribution, up from 31% contribution from a year back.
EBITDA margin expanded 57bpsQoQ to 18.4%, below our expectation.
PAT was Rs1,848mn, 1%QoQ growth. EPS was Rs8.8, 1%QoQ growth.
Onsite pricing for Applications declines, stable for other towers –
Onsite pricing for applications segment declined 2.9%QoQ to
USD67/hr. All other pricing including offshore and onsite for
Applications, ITO and BPO remained stable. The management
expects no pressure from HP in terms of price negotiation. Overall
pricing is also expected to be stable.
US and Europe decline - In dollar terms, America (65% contribution)
declined 4.5%QoQ, Europe (15% contribution) declined 9.1%QoQ and
Emerging Markets (20% contribution) grew 7.7%QoQ.
All service lines decline except IMS - In rupee terms, Application
maintenance (32% contribution) grew 1.8%QoQ, application
development (28% contribution) grew 4.6%QoQ, IMS (24%
contribution) grew 11.9%. Technical help desk (5% contribution)
declined 16%QoQ and customer service (5% contribution) declined
3.3%QoQ.
Employee headcount declines; robust new client addition – Total
headcount declined 4%QoQ to 38,798. Utilisation (including trainees)
for Application, BPO and ITO grew 100bpsQoQ each to 77%, 71% and
81% respectively. Added 28 new clients (17 from direct channel and
11 from HP channel). Top client declined 3%QoQ, top 10 clients
declined 3%QoQ.
Outlook and Recommendation – Q1FY12 financials are below
expectations with higher than expected decline from HP. As HP is
not performing well in its Enterprise Solutions segment, we expect
pressure on revenue growth in MphasiS as well with a risk of pricing
cut in future. The stock was at attractive valuations after the last
quarter’s earnings and it has given 37% absolute returns. We
downgrade the recommendation from BUY to ‘REDUCE’ with a target
price of Rs400 based on 10x PER multiple on 18-months forward
earnings.
No comments:
Post a Comment