Buy Patni Computer: AnandRathi Securities

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Anand Rathi Securities has initiated a buy rating on Patni Computer Systems with a price target of Rs 620 in its research report dated 10th March, 2010.

"Patni has been able to increase utilization and lower overhead costs to maintain margin. We forecast a steady margin performance over 2009-11 by the flattening out of the employee pyramid, improving productivity through fixed-price projects and further cost rationalization.

Our target price of Rs620 comprises Rs515 (at a target PE of 12x 12-month forward EPS) and Rs105 (valuing the cash above the average 10% peer cash holding). Our target multiple is at a 40% discount to average large-cap FY11 PEs (20x) and in line with IT-midcaps." says AnandRathi research report.

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