Genpact Ltd (G) Neutral: Improving Trends – Productivity Gains, Investments  Citi Research

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Genpact Ltd (G)
Neutral: Improving Trends – Productivity Gains, Investments
 Key takeaway(s) — Genpact continues to gain market share relative to
traditional companies trying to do integrated IT+BPO. Combined with modestly
improving macro, it should help 2012. But part of the reason for the market share
gain is its performance of giving clients consistent productivity gains – this takes
away from top-line growth. Also, GE continues to be a slow-growth business.
 Good visibility for the BPM business — On the BPM (business process
management) side, there is good visibility for next 3-6 months, at least for current
book of business. It is lower for re-engineering and analytics work.
 The Insurance vertical pipeline is very active — Genpact is currently investing
in Europe, where it solid levels of opportunity.
 Reiterate Neutral rating on G — Reiterate Neutral rating on G — Genpact is a
solid performer in an attractive end-market; but we prefer the risk/reward profile
of Buy rated EXLS to G in the BPO segment.

Genpact (G, Neutral):: Goldman Sachs:: Second Annual IT Services Trip

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Genpact (G, Neutral, covered by Vincent Lin, CFA)
1) Consistent with expectations, margins should improve modestly over time –
Margins on gain-share model (i.e., productivity improvements) are typically higher
than FTE model; however, most RFPs still prefer the FTE model. As the revenue mix
from gain-share model (which we estimate at 10%-15% of revenues) increases over
time, we believe margins should structurally improve, offset by continued wage
inflation and ongoing investments.
2) Headstrong acquisition is a strategic fit and early integration appears on track –
Management estimated that cost synergies should total $1-$2 mn in year 1 and $4 mn
in year 2. Revenue synergies are expected to total $25 mn. EXLS go to market efforts
are centered on a common sales team driving cross selling opportunities.
3) De-risking GE, CPG is the growth engine – With a growth rate of 2%-3% per year the
contribution from GE (30% of revenue) is expected to continue declining as the rest of
the company is expected to sustain a growth pace of 20% yoy growth. Among verticals,
CPG growth momentum is robust; G recently added Walgreens as a major client and is
currently pursuing similar deals in the pipeline.

for details of remaining company see link

Goldman Sachs:: Second Annual IT Services Trip: LT drivers exist, 2012 outlook hazy

Genpact - Headstrong Acquisition a Surprise, Interesting Move - Net Positive :: JP Morgan

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This morning, Underweight-rated G announced a definitive agreement to
acquire Headstrong, an offshore-based IT services firm providing services
to banking and capital markets, for $550M in cash. We are familiar with
Headstrong, and believe the company is quite strong in the capital markets
arena within IT services. We were  surprised by the deal; G is making a
fairly large move outside its core BPO roots, but our initial reaction is
positive since 1) the deal should be GAAP accretive assuming no
significant cost synergies, 2) the valuation is reasonable, and 3) it
strategically diversifies G to offer more integrated ITS/BPO services with
access to domain expertise and clients in the productive capital markets
sector. We do see challenges in integration, and will watch employee
retention closely once the deal closes.

Goldman Sachs: India IT: Genpact (G, Neutral, $14.81)

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Genpact (G, Neutral, $14.81)
 Solid pipeline, but pace of decision making remains slow – Genpact indicated that
while its pipeline is at an all time high, the pace of decision making and sales cycle
remain protracted, which coupled with transition delays from existing clients caused
the company to reduce its 2010 guidance in the most recent quarter.

Genpact- F3Q Miss and Guidance Cut , Downgrade to Neutral : JPMorgan

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Genpact
▼ Neutral
Previous: Overweight
G, G US
F3Q Miss and Guidance Cut Puts Stock in Penalty
Box, Downgrade to Neutral



G reported very disappointing results and guidance last night, primarily due to
client conversion delays. The shortfall will likely strike a raw nerve with
investors, as the company had defended the achievability of back-end loaded
guidance. While we still expect G to eventually penetrate existing clients, it could
be at least two quarters out before we see evidence of this playing out and getting
priced back into the stock. With limited catalysts ahead (FY11 guidance to be
given with 4Q results will likely be discounted by the Street), the stock is likely
dead money, and we downgrade the shares to Neutral from Overweight, and
establish a Dec'11 price target of $15, down from our Dec-11 price target of $17.
We now prefer EXLS (N-rated) as the best short-term play on offshore BPO. We
still see good long-term value in G.
• 3Q miss a negative surprise. Revenue/non-GAAP margins/adj. EPS of
$322M/15.4%/$0.20 vs. JPMe of $330M/18.4%/$0.21 and consensus of
$332M/NA/$0.22. However operating EPS missed by $0.04 and was offset by
below the line FX gains (non operational component) and lower taxes. The
company attributed the disappointing miss to client delays in transitioning a few
contracts on which it had made upfront production investments.
• GE better than expected, Global clients below. GE revenue continued to
outperform expectations, increasing 11% y/y (vs. JPMe 5%). The Global
Clients segment however was a big disappointment increasing only 11% on an
organic basis compared to our estimate of 21% y/y growth and prior qtr. at 13%
y/y. The company indicated its experienced delays in a few of its top global
clients which resulted in $8m in revenue miss during the quarter (4% of global
clients segment’s overall revenue). We believe significant growth slowdown in
global clients could be a shor-term thesis-breaker as investors expect the
segment to drive G’s long term revenue growth. While we still expect G to
eventually penetrate existing clients, it could be at least two quarters out before
we see evidence of this playing out and getting priced back into the stock.