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We recently met the management of Sasken at their corporate
office in Bangalore. Following are the key points of discussion.
Large account to stabilise in FY13– The shift of revenues from
Sasken to other vendor in case of a large account has happened in
recent quarter but still some part of the work is with Sasken. A stable
annual run rate might be in the range of USD14-15mn after the June
2012 quarter.
Semiconductor stable – TI is the largest client in this segment
where projects are coming in Android platform. In this platform, a
latest large deal is won in Q3 with TI. Also, due to changes in wireless
technologies there are some project wins with Intel and Qualcomm.
Emerging segments gaining traction – Consumer electronics,
healthcare, education, enterprise mobility and automotive (rear-seat
entertainment) are newer areas of interest for Sasken. These new
segments are likely to attain quarterly run-rate of USD3mn during
FY13.
Attrition declined but still very high – Most of the replenishment is
done in the form of freshers (~30 freshers are added every month).
There are efforts to retain employees and reduce attrition further.
With improved operations utilisation is also expected to increase.
Operating margin likely to remain muted– Operating margin is
likely to remain muted due to lack of growth which takes away
potential benefits of scale. Also, the recent currency movement will
reflect in lower margins in Q4 compared to Q3. Long term
sustainability of margin is threatened due to decline in revenue.
Open offer at maximum price of Rs180 per share – payable in cash
for an aggregate amount not exceeding Rs8,64.8mn. The offer size
represents 22% of the aggregate of the Company's paid up equity
capital and free reserves as on March 31, 2011. At the end of Q3,
Sasken has cash and equivalent of ~Rs1,800mn.
Outlook and Recommendation - There is further decline expected in
top account and margin sustainability is also a concern. The
fundamental problem is revenue growth which can be mitigated only
through some deal wins. The stock has recently run up with the news
of open offer. We downgrade the recommendation to ‘REDUCE’ with
a target price of Rs120 based on PER multiple of 6x 18-months
forward earnings.
India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details �� ��
We recently met the management of Sasken at their corporate
office in Bangalore. Following are the key points of discussion.
Large account to stabilise in FY13– The shift of revenues from
Sasken to other vendor in case of a large account has happened in
recent quarter but still some part of the work is with Sasken. A stable
annual run rate might be in the range of USD14-15mn after the June
2012 quarter.
Semiconductor stable – TI is the largest client in this segment
where projects are coming in Android platform. In this platform, a
latest large deal is won in Q3 with TI. Also, due to changes in wireless
technologies there are some project wins with Intel and Qualcomm.
Emerging segments gaining traction – Consumer electronics,
healthcare, education, enterprise mobility and automotive (rear-seat
entertainment) are newer areas of interest for Sasken. These new
segments are likely to attain quarterly run-rate of USD3mn during
FY13.
Attrition declined but still very high – Most of the replenishment is
done in the form of freshers (~30 freshers are added every month).
There are efforts to retain employees and reduce attrition further.
With improved operations utilisation is also expected to increase.
Operating margin likely to remain muted– Operating margin is
likely to remain muted due to lack of growth which takes away
potential benefits of scale. Also, the recent currency movement will
reflect in lower margins in Q4 compared to Q3. Long term
sustainability of margin is threatened due to decline in revenue.
Open offer at maximum price of Rs180 per share – payable in cash
for an aggregate amount not exceeding Rs8,64.8mn. The offer size
represents 22% of the aggregate of the Company's paid up equity
capital and free reserves as on March 31, 2011. At the end of Q3,
Sasken has cash and equivalent of ~Rs1,800mn.
Outlook and Recommendation - There is further decline expected in
top account and margin sustainability is also a concern. The
fundamental problem is revenue growth which can be mitigated only
through some deal wins. The stock has recently run up with the news
of open offer. We downgrade the recommendation to ‘REDUCE’ with
a target price of Rs120 based on PER multiple of 6x 18-months
forward earnings.
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