Hold Patni Computer; target of Rs 300: PINC Research

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Hold Patni Computer; target of Rs 300: PINC Research

PINC Research has recommended hold rating on Patni Computer Systems with a target of Rs 300, in its July 26, 2011 research report.

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PINC Research has recommended hold rating on Patni Computer Systems with a target of Rs 300, in its July 26, 2011 research report.

"Patni Computer Systems, Q2CY11 revenue declined 3.4%QoQ to USD183.8mn (9.7%YoY growth), lower than our and street's expectations. EBITDA margin was 1.9%; sharp decline due to one-time charges related to integration and also impact of salary increase. PAT was Rs108mn (90.8%QoQ decline)."

"Revenue declined 3%QoQ to Rs8,221mn largely due to volume decline from a large client in Banking and Financial Services and muted growth in other verticals. EPS declined 91%QoQ and 92.7%YoY to Rs0.8 (Consensus Rs7.7, PINCe Rs7.7). Banking and Financial Services revenue (11.7% contribution) declined 2.6%QoQ and Insurance & Healthcare revenue (38.9% contribution) declined 3.2%QoQ. Manufacturing, Retail & Distribution revenue (37.1% contribution) grew 0.9%QoQ. Communication, Energy & Utilities declined 19.4%QoQ. EMEA's revenue (13% contribution) declined 13.3%QoQ while Americas' revenue (79.3% contribution) declined 1.8%QoQ."

"APAC's revenue (7.5% contribution) declined 3.4%QoQ. Top client grew 11.3%QoQ while non-top 5 clients and non-top 10 clients declined 6.5%QoQ and 8.2%QoQ, respectively. One of the large clients shifted to iGATE due to its requirements. Added 19 new clients but total clients reduced by 8 to 291. Employee count was restated to include subcontractors. Net decline of 190 employees taking the count to 18,372. Attrition rate (LTM, excluding BPO) declined 170bpsQoQ to 22.9% and utilisation rate increased 140bpsQoQ to 75.7%."

"Management's outlook on revenue was weak for full year growth and expects it to stabilise only in next year. EBITDA margin will be under pressure due to higher SG&A. Overall profit will further dent due to higher depreciation & amortisation as assets were restated, which increased substantially. Factoring these, we downward revise earnings estimates. Maintain 'HOLD' recommendation with a target price of Rs 300 based on 11x CY12E EPS," says PINC Research report.

Public holding more than 90% in Indian cos

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To read the full report click on the attachment