Buy Sasken Communication; target of Rs 190: PINC Research

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Buy Sasken Communication; target of Rs 190: PINC Research

PINC Research is bullish on Sasken Communication Technologies and has recommended buy rating on the stock with a target of Rs 190 in its April 28, 2011 research report.

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PINC Research is bullish on Sasken Communication Technologies and has recommended buy rating on the stock with a target of Rs 190 in its April 28, 2011 research report.

"Sasken's overall revenue declined 7.3%QoQ to USD28.4mn due to lack of growth in IT services and decline in revenue of Products which had one time licensing fees in Q3FY11. Tax write backs helped in posting higher-than-expected PAT of Rs188mn and EPS of Rs6.6 (19%QoQ growth)."

"Revenue declined 7.1%QoQ to Rs1,285mn due to dip in Products' revenue and continued slowdown from top clients. IT services' revenue grew 0.7%QoQ to Rs1,167mn. The EBITDA margin declined ~610bpsQoQ to 13.3%. Full year revenue declined 4.8%QoQ to Rs5,464mn. FY11 margin stood at 17.6% compared to 17.7% in FY10 and FY11 EPS was Rs25.9. Products revenue declined ~60%QoQ to Rs87mn, after strong growth in Q3FY11 which had one time licensing sales in China. Top 5 clients' revenue declined 12.9%QoQ and top 10 clients' revenue declined 15.8%QoQ. Non-top 10 clients with 39% revenue contribution grew 23.4%QoQ. The company is trying to diversify and find opportunities in other segments. Automotive, utilities & industrial revenue contribution increased from 0.5% to 2.3% and its revenue grew 294%QoQ. The attrition rate (annualised) declined 340bpsQoQ to 31.4%. The utilisation rate also declined 20bpsQoQ to 62.1%. Added 376 employees on gross level to take the total headcount to 3,508. Most of the employee additions are laterals."

"The revenue growth from IT services continues to be muted but the company has planned to diversify and find other avenues of growth in emerging technologies like Android and segments like Automotive etc. Nokia's ramp down is hurting growth. The management has margin levers but need effective sales channel to grow revenues. It has cash and equivalents of Rs1, 850mn (Rs65 per share). At CMP of Rs164, the stock is trading at 7.5x FY12E earnings. Maintain 'BUY' recommendation with a target price of Rs 190," says PINC Research report.  

Institutional holding more than 40% in Indian cos

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To read the full report click on the attachment