Buy Sasken Communication: Edelweiss Research

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Buy Sasken Communication: Edelweiss Research

Broking house, Edelweiss Research is bullish on Sasken Communication and has maintained buy rating on the stock.

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Sasken Comm BSE | NSE 25/05/12 Are Mutual Funds betting on Sasken Comm?

Broking house, Edelweiss Research is bullish on Sasken Communication and has maintained buy rating on the stock.

Edelweiss Research report on Sasken Communication

"Sasken's Q2FY07 results were better than expectations. The services business, in particular, continued its improved performance with Q-o-Q revenue growth of 15.5% on organic basis and 27.2% including acquired revenues from its Botnia acquisition for one month. The company announced two more platform design wins for its products business, one each for its 'M-Series' and 'S-Series' product group. Services EBITDA margin expanded by 90bps Q-o-Q to reach 24%. This was achieved through a combination of billing rate hikes, achieving milestone in fixed-price projects, and some benefit from currency depreciation. We expect 2HFY07E services EBITDA margin to be at 22.3% compared to 23.6% in 1HFY07." 

"Sasken will report fully consolidated revenues in 2HFY07E from its Finnish Botnia Hightech acquisition. We understand that Botnia's business is growing at a healthy clip of 40% plus for FY07E, with a healthy outlook for FY08E. We also expect the company to have 15 platform design wins compared to 10 currently."

"We see strong revenue growth trajectory in the services business and the option value in the products business to lead to the company having premium valuation compared to its peer group. At a P/E of 23.1x and 12.1x and EV/EBITDA of 13.9x and 7.8x for our FY07E and FY08E earnings, respectively, we maintain our 'BUY' recommendation."