Dolat Capital is bullish on Mahindra Satyam
and has recommended buy rating on the stock with a target of Rs 145 in its January 31, 2013 research report.
“Satyam has been delivering improved performance quarter after quarter. It has made commendable progress in its financial performance with 8 quarter Revenue CQGR of 5.4% (well ahead of peers) and 1000bps improvement in the operating profitability. The pipeline continues to be robust (5 key deal wins in the quarter) both on the RTB and discretionary side. We maintain our positive stance on MSAT/TechM in view of impending merger and likely rerating on the stock.”
“Mahindra Satyam reported Q3 FY13 numbers inline with our estimates with a Revenue growth of 0.1% QoQ at Rs 19.4bn (Revenue in USD 356mn inline with DE of USD 356mn). Volumes grew by 1.5% QoQ, however the realizations were soft due to higher BPO revenues (grew 18% QoQ). It has settled its claim with Aberdeen UK agreeing to the settlement recommended by commercial court in London for a total consideration of USD 68mn as against total claim of USD 298mn. It has now a total cash outlay of Rs 2940mn after adjusting of contingencies provision it made to the tune of Rs 750mn, subject to RBI approval. IT services revenues were down marginally QoQ in Rs terms owing to expected furloughs during the quarter. BPO grew by 18% QoQ boosted by Holiday weekend revenues in the retail vertical. It is witnessing sustained business momentum across verticals both on the regular and discretionary spends perspective. It is confident of benefiting from likely pent up demand in the discretionary spending based on its strong positioning. It has indicated higher need based hiring over campuses as it would like to remain cautious on the environment.”
“We believe that the settlement of the various claims (Post Aberdeen only claims of Indian Income Tax authority are due) and strong recovery in the financial performance would lead to re-rating on the stock. We believe that post merger with Tech Mahindra (swap of 8.5 : 1) the combined entity will overcome most of the hangovers of the two constituents and will lead to a strong re-rating of the stock. We maintain our positive view with an BUY rating on the stock with a target price of Rs 145, valued at 11x of its FY13E earnings of Rs 13.1 per share (TechM TP: Rs 1325),” says Dolat Capital research report.
Public holding more than 90% in Indian cos
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