Dec 01, 2016 11:39 AM IST IST | Source: Moneycontrol.com
Hold Cigniti Technologies; target of Rs 421: Axis Direct
Axis Direct recommended hold rating on Cigniti Technologies with a target price of Rs 421 in its research report dated November 24, 2016.
Axis Direct's research report on Cigniti Technologies
Cigniti Technologies Ltd (Cigniti) reported revenues and earnings of Rs 170.2 Cr (up 16.5% Y-o-Y, 3.1% Q-o-Q) and Rs 13.9 Cr (up 9.8% Y-o-Y, 2.6% Q-o-Q) respectively in Q2FY17. EBIDTA margin in Q2FY17 contracted 150 bps Y-o-Y to 15.8% primarily on account of higher personnel expenses. On sequential basis, on account of increased personnel and other expenses, margin declined by 210 bps. Margins have declined due to hirings, payment of arrears, salary revision, expansion in newer regions, pre-closure of few Australian offices and higher processing charges.
The company is continuously recruiting the new employees to meet the requirements. For Q2FY17, employee utilization for onsite and offshore business was reported at 85% and 73% respectively. We estimate revenues and earnings to grow at a CAGR of 19% and 18.2% respectively over FY16-FY18E. Considering macro challenges (mainly Europe/UK exposure) going forward for IT players, expected pricing pressure and currency volatility, we reduce our target P/E for Cigniti to 15x and arrive at a target price of Rs 421.
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