Geometric Inorganic venture – Step in the right direction:: Prabhudas Lilladher,

Geometric has acquired 100% stake in Munich (Germany) based ‘3Cap Technologies
GmbH’, a specialist in automotive embedded system for ~€11m. The acquisition is inline
with the company’s stated objective of strengthening revenues from Europe,
Automotive vertical and Embedded System. We retain our “Accumulate” rating.

Geometric :STRONG TRACTION IN ENGINEERING SERVICES: IFCI research

Organisation restructuring structure will help enhance growth
The management has restructured organisation in order to get more growth from engineering services. The organisation has been divided it into two teams, each handling sales and delivery separately. This structure is expected to provide higher efficiency, improve response time to customer and increase sales.

Sizzling Stocks - Divi's Laboratories , Geometric:: Business Line

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Geometric -One‐off marred, otherwise a decent quarter: Prabhudas Lilladher,

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Geometric posted a steady revenue growth in line with expectations, however
EBITDA margin deteriorated by 544bps QoQ to 12.5% due to extra ordinary items of
expenditure & currency fluctuation. In our upgrade note in the previous quarter, we
indicated presence in growth market, with focus on margins yielding stronger
performance. But this quarter performance marred our expectation due to volatility.
We retain ‘Accumulate’, with a TP of Rs80.
􀂄 Steady performance accompanied by lower than expected margins : Geometric
reported in-line revenue growth of 2.7% QoQ to Rs2.25bn (PLe: Rs2.21bn, Cons:
Rs2.20bn) and 5.4% QoQ in USD terms to $44.92m (PLe: $43.91m). EBITDA
margin dipped by 544bps to 12.5% (PLe: 17.4%, Cons: 16.5%), due to rupee
depreciation, higher utilization & extra ordinary items of expenditure. EPS degrew
by 39.9% QoQ to Rs2.04 (PLe: Rs3.23, Cons: Rs3.15).
􀂄 Two‐fold performance – Revenue growth and margin expansion: We believe
that the company’s strength in PLM and PES space is playing out well. The
company’s ability to cross-sell strength of different geographies has started
paying-off. We expect steady margin performance as these extra-ordinary is not
going to be part in FY13. The management didn’t give detail for extra-ordinary.
􀂄 Conference call highlight 1) Volume growth at ~5.1%, no change in pricing 2)
New contracts amounting to $11.71mn awarded during the quarter (Q3FY12 :
$3.55mn) 3) Total headcount is 4567 (Q3FY12: 4447) 4) Growth from emerging
verticals like ship building, Oil & Gas & Energy 5) Effective tax rate to be ~28%
for FY13 6) Fresher Hiring for FY13 to be ~200+ 7) DSO stood at 65.28 for
Q4FY12 (Q3FY12: 71.36)
􀂄 Valuation & Recommendation: We believe that Geometric’s operational
performance is expected to strengthen from here. We expect a steady revenue
performance for the company in FY13 with improved margins. We reiterate our
‘Accumulate’ rating, with a TP of Rs80, 6x FY13E earnings estimate.

Geometric (Rs 77.4): BUY : Business Line

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Geometric Ltd: Buy ::Business Line

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Geometric : Buy ::Business Line

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We recommend a buy in the stock of Geometric from a short-term perspective. It is seen from the charts of the stock that after registering a 52-week low at Rs 34.7 on August 19, it bottomed out. Thereafter, the stock consolidated sideways in the broad range between Rs 36 and Rs 48.

We observe a double bottom formation, a bottom reversal pattern with neckline at Rs 48. On Monday, the stock skyrocketed 10.6 per cent, conclusively breaking through the neck-line as well as a key resistance at Rs 50. There is an increase in daily volumes over the past three trading sessions. The stock is trading well above its 21- and 50-day moving averages.

The 14-day relative strength index is featuring in the bullish zone and weekly RSI is on the brink of entering into the bullish zone from the neutral region. The daily moving average convergence divergence indicator has signalled a buy, and is likely to enter into the positive territory.

Both daily and weekly price rate of change indicators are hovering in the positive terrain indicating buying interest. Our short-term outlook on the stock is bullish. We expect its rally to prolong and reach our price target of Rs 55.5 or Rs 57 in the upcoming trading sessions. Traders with short-term perspective can buy the stock with stop-loss at Rs 52.

Buy GEOMETRIC ; TARGET PRICE: RS.61 :: Kotak Sec

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GEOMETRIC LIMITED
PRICE: RS.45 RECOMMENDATION: BUY
TARGET PRICE: RS.61 FY13E P/E: 4.2X
q 2QFY12 results were better than our estimates.
q Volumes grew by about 7%, partly due to the consolidation of Delmia,
which was acquired by 3DPLM, the partly owned subsidiary of Geometric.
Delmia's financials were not disclosed by the company.
q EBIDTA margins improved due to the rupee depreciation, pyramid impact
and better utilization levels.
q The management has indicated that, it is not witnessing any project cancellations
or deferrals. Also, there is demand from both, OEMs and industrial
customers.
q The amount of new orders booked fell marginally to about $8mn during
the quarter ($9.4mn). The company is investing more in business generation
activities, and will continue to do so, we believe.
q Geometric is now focusing on verticalised services and solutions to increase
relevance to customers. Value engineering and cost reduction for
clients are the focus areas.
q The management has indicated greater focus on improving margins
through levers like utilization rates and G&A leverage along with better
utilization of the employee pyramid.
q Consultancy charges may set off any margin improvement over the next
2 - 3 quarters. Company has retained a consulting firm to restructure
business operations.
q We have adjusted earnings estimates to accommodate for 2QFY12 results.
We also introduce FY13E earnings. Our earnings estimates stand at
Rs.9.4 and Rs.10.7, respectively for FY12 and FY13, respectively.
q Our DCF - based price target works out to Rs.61 (Rs.67 earlier), based on
FY13E earnings. We upgrade the stock to BUY based solely on valuations.
q Further signs of stability and sustainability in the revenue profile and an
improvement in the margin profile of Geometric will make us more bullish
on the stock. Our exit multiple works out to 6x FY13E EPS.

Geometric - Mid-sized IT vendor specialising in engineering solutions::Macquarie Research,

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Geometric
Mid-sized IT vendor specialising in engineering solutions  
 We met with the management of Geometric (GEO IN) to understand the
outlook for the Indian mid-sized IT services players and the business drivers
for the company and their positioning vs the offerings of the larger Indian IT
vendors.
 Geometric is a mid-cap company that offers engineering solutions, services
and technologies. Its portfolio of offerings addresses the needs of top Product
Lifecycle Management (PLM) vendors across the world including Microsoft,
Oracle Siemens and PLM, etc.
 It has a 70:30 partnership with Dassault Systèmes named 3DPLM which
operates with a team of 800 people. The partnership contributes 23% to the
company’s revenues.
Margins to remain under pressure in FY12
 Operating margins declined to 7.8% in FY11 (vs 11.6% in FY10). Based on
our meetings with management, margin pressure appears likely to persist due
to wage inflation as a result of a 12-14% salary increase in April 2011 and the
tax rate shooting up to ~29% this year from 3% in FY11.
 We note that the company has appointed Mr. Manu Parpia as MD and CEO
after the departure of its previous CEO in April. Mr Parpia is the founder and
promoter of Geometric and in the current scenario his challenge remains to
achieve healthy growth and manage the margin headwinds.
Superior client mix but high concentration poses risk
 According to management, its niche focus and client list is a key differentiating
factor vs. other mid-sized IT companies. The company has mined its existing
client relationships well, with the result that the top 10 clients now contribute
70% to revenues and the top 5 clients comprise 55% of revenues. However,
this revenue concentration among select clients poses some risk if the clients
were to reduce their pricing or shelve their IT budgets.
Traction in industrial sector to boost revenues
 The direct industrial sector contributes 61% to revenues for Geometric. In
addition, software vendors and products contribute 31% and 8%, respectively.
Macquarie US economist Rebecca Hiscock-Croft’s US GDP growth forecast
of 3.1% for FY12 augurs well for the company’s demand pipeline.
Time for cherry picking mid caps
 We have a positive view on the Indian IT services sector.  Our preference is
for mid cap companies that are seeing strong demand conditions and
increasing margin profiles, resulting in better earnings in FY12-13E.
 Among mid caps, we prefer Hexaware and Mindtree on the back of their
better valuations and earnings growth in FY12E. Among large caps, we like
Infosys and TCS.

Geometric - Margins flat QoQ - excluding one - offs:: Kotak Sec,

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GEOMETRIC LIMITED

RECOMMENDATION: ACCUMULATE
TARGET PRICE: RS.77
FY12E P/E: 6.2X
q 4QFY11 results of Geometric were below expectations on the operational
side. A higher other income component led to PAT being higher than
estimates.
q Volumes grew by 2.6%, which was marginally lower than our estimates.
This comes on the back of an8.6% rise in volumes in 3Q and likely indicates
improving demand scenario.
q EBIDTA margins rose on a sequential basis by 97bps. However, they were
disappointing as they contained reversals of provisions.
q The management has indicated that, more discretionary budgets are being
released and there is demand from both, OEMs and industrial customers.
q The amount of new orders booked reduced to $7.25mn ($9.42mn). The
company has invested more in business generation activities, and will
continue to do so, we believe.
q Geometric is now focusing on verticalised services and solutions to increase
relevance to customers. Value engineering and cost reduction for
clients are the focus areas.
q We have adjusted earnings estimates to accommodate for 4QFY11 results.
For FY12, higher tax rates may restrict PAT growth to 10.6%.
q We have been indicating that, maintaining margins will be a challenge
for Geometric due to the high capacity utilization ratio (about 90%) and
need to invest in S&M. Consequently, we have assumed margins to move
in a narrow band.
q We expect an EPS of Rs.10.2 in FY12.
q Our DCF - based price target works out to Rs.77 (Rs.87 earlier), based on
FY12E earnings. We maintain ACCUMULATE. Our exit multiple works out
to 8x FY12E EPS.

Accumulate GEOMETRIC: Target Rs 87: Kotak Sec

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GEOMETRIC LIMITED
RECOMMENDATION: ACCUMULATE
TARGET PRICE: RS.87
FY12E P/E: 7.6X

q 3QFY11 results of Geometric were a mixed bag for us. While revenues
came in above expectations, margins disappointed.
q Volumes grew by 8.9%, which was impressive; more so as it came after
a 7% QoQ rise in 2Q. This likely indicates improving demand scenario
and better execution.
q EBIDTA margins fell on a sequential basis by 143bps. Margins disappointed
even after considering a one-time impact.