Accumulate Rolta India; target of Rs 160: P Lilladher

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Accumulate Rolta India; target of Rs 160: P Lilladher

Prabhudas Lilladher is bullish on Rolta India and has recommended accumulate rating on the stock with a target of Rs 160 in its May 06, 2011 research report.

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Prabhudas Lilladher is bullish on Rolta India and has recommended accumulate rating on the stock with a target of Rs 160 in its May 06, 2011 research report.

"Rolta India reported Q3FY11 result in line with our expectation. Revenue was in-line with our expectation, whereas, margins were ahead. The company maintained their revenue guidance of 18% YoY growth. We reiterate our 'Accumulate' rating, with a revised target price of Rs 160, a downward revision of 5% due to multiple revision.  Rolta reported revenue growth of 4.3% QoQ to Rs 4.60 billion (PLe: Rs 4.57 billion, Cons: Rs 4.51 billion). EBITDA margin expanded by 38bps QoQ to 39.8% (PLe: 39.2%), driven by EBITDA margin expansion in EGIS vertical by 63bps QoQ. EPS grew by 7.6% QoQ (excl. Rs 76.1 crore of one-time gain) to Rs 5.22 (PLe Rs 4.70), due to higher-than-expected other income at Rs 107.5 million (Q2FY11: Rs 21.5 million, PLe: Rs 25.4 million)."

"Order book grew by 7.2% QoQ to Rs 20.4 billion, strongest growth in the last ten quarters. Order book growth was driven by high margin business EGIS (10.6% QoQ). Also, 65-70% of the book is driven by solution business; hence, improving visibility for high 30s EBITDA margin for FY11. However, the management guided for tax rate of 14- 15% for FY12 and moving higher in FY13. Other highlights: 1) Growth guidance for FY11 revenue 16-18% with profit growth of 25% 2) Cash: Rs 1 billion, Debt Rs 13 billion 3) Q3FY11- FCF: Rs 40 crore, Capex: Rs 75 crore, Cash flow from operation: Rs 115 crore 3) IP revenue for Q3FY11: 14% (9M: 16%) 4) Interest rate on debt 7% 5) Tax rate FY12 - 16-18% 6) S&M cost has gone up by 25-30% YoY as the company hired more domain consultants."

"We believe that the improving order book has improved the visibility of revenue guidance. We revise our multiple to 9 from 10 (in-line with discount to larger peers); however, retain our 'Accumulate' rating, with a revised target price of Rs 160 (Old Rs 170), 9xMar12e earnings estimates," says Prabhudas Lilladher research report.

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