Hold Geometric; target of Rs 82: PINC Research

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Hold Geometric; target of Rs 82: PINC Research

PINC Research has maintained hold rating on Geometric with a target of Rs 82 in its January 25, 2011 research report.

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PINC Research has maintained hold rating on Geometric with a target of Rs 82 in its January 25, 2011 research report.

"Geometric reported USD revenue growth of 10.5%QoQ led by robust volume growth of 8.9%QoQ and pricing improvement of 1.4%QoQ. Revenues grew 7.4%QoQ to Rs 1,632 million (PINCe - Rs 1,579 million) led by strong volume growth and a positive surprise in pricing which grew on the back of higher IP revenues. EBIDTA margins dipped 132bpsQoQ on the back of a mid term salary hike of 7% and a one time G&A cost. Forex gain of Rs 43 million and lower tax rates supported the bottom-line which grew 10.6%QoQ to Rs 153 million. US grew 10.4%QoQ, Europe witnessed positive surprise with 13.4%QoQ growth Auto vertical posed strength with 13.1%QoQ led by robust demand in US. Others' (emerging verticals) surged 26.6%QoQ on expansion towards newer verticals."

"Engineering services grew 10.8%QoQ on the back of high demand for discretionary IT spend globally. IP led revenues surged 23.4%QoQ led by a seasonally strong quarter. PLMS grew 14.2%QoQ in the software segment whereas SPE was muted with 5.4%QoQ growth. Revenues from new business contributed 5% of revenues led by strong client addition and robust order book. 10 new clients were added out of which 4 clients were in US and 4 in APAC from industrial and automotive verticals. The order book grew 13.1%QoQ and now stands at USD 9.4 million. Top 5 clients ramped up and grew 14.6%QoQ."

"The management claims that demand environment and deal pipeline continues to be strong. Higher recovery in modern engineering will boost engineering services going forward. EBIDTA margins are expected to improve to 14% in FY12 led by improved offshoring, higher fresher addition and higher FPP. We have introduced FY13E financials. We maintain 'Hold' on the stock with a target price of Rs 82 based on 9xFY12E earnings," says PINC Research report.

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To read the full report click on the attachment