Buy Mahindra Satyam; target of Rs 105: BP Equities

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Buy Mahindra Satyam; target of Rs 105: BP Equities

BP Equities is bullish on Mahindra Satyam and has recommended buy rating on the stock with a target of Rs 105 in its August 16, 2011 research report.

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RELATED NEWS Buy Stone India; target of Rs 74: Sushil Finance Buy Union Bank; target of Rs 350: Sushil Finance Buy State Bank of India; target of Rs 2561: KRChoksey ALSO READ See previous views by BP Equities See what other Experts & Brokerages are saying about Mahindra Satyam See messages about Mahindra Satyam Mahindra Satyam BSE | NSE 30/05/12 Are Mutual Funds betting on Mahindra Satyam?

BP Equities is bullish on Mahindra Satyam and has recommended buy rating on the stock with a target of Rs 105 in its August 16, 2011 research report.

"Mahindra Satyam delivered robust performance in Q1FY12, with revenues and margins coming well above ours as well as street's expectations. The company's registered significant improvement in operational efficiencies, expand margins by 167 bps sequentially to 14.6%, which we expect to remain more or less stable at current levels, based on increased fresher's hiring and continued operational efficiencies( Margins have expanded 823 bps in the last two quarters). Winding up of ADS program came as a disappointment, while ~5% growth in Top/Top5 clients accounts appears positive, we believe that the company is gradually moving on its path to recovery. However, concerns remain over lower clarity on some additional pending cases and expected date of merger with the parent company."

"Mahindra Satyam revenues in US$ terms grew 5.3% Q-o-Q (in line with Tier-I peers) to US$ 320 mn aided by a sequential volumes growth of 3.9%, improvement in Utilization and better pricing. Going forward we expect the company to exhibit robust volumes growth in FY12E aided by improvement in utilization and increased hiring. The company added 2,172 employees in the quarter out of which 60%(~1300 were fresher's) taking the total employee count to 31,438. INR revenues were up 4.3% Q-o-Q and 14.9% Y-o-Y and stood at Rs 14.3 bn. Adjusted Net profit came in at Rs.2.3 bn, down 7.8% sequentially but up 113.9% Y-o-Y (ahead of expectations) primarily driven by expansion in margins, higher other income and lower tax rate in the quarter. Adjusted EPS for the quarter stood at Rs 1.9, as against Rs 2.1 in the last quarter."

"In view of company's improving operational efficiency, robust employee addition for FY12E, expansion in margins, return of old customers, increase in discretionary IT spending and efficient settlement of almost all major pending law suits, we remain bullish on Mahindra Satyam. We maintain our top line revenue estimate which stands at Rs 62.3 bn and Rs 76.3 bn up 21.0% and 22.6% Y-o-Y for FY12E and FY13E respectively. We improve our EBITDA margins targets and now expect it to stand at 15.0% and 15.6% for FY12E and FY13E respectively (in line with industry average). The stock is trading at a P/E of 9.8x and 8.3x FY12E and FY13E earnings. We maintain our "BUY" rating on the stock and raise our price target to Rs 105 ~12x times FY13E earnings," says BP Equities research report. 

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To read the full report click on the attachment