Hold Rolta India; target of Rs 170: Anand Rathi Securities

Anand Rathi Securities has recommended hold rating on Rolta India with a target of Rs 170, in its February 1, 2011 research report.
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Feb 08, 2011, 06.28 PM | Source: Moneycontrol.com

Hold Rolta India; target of Rs 170: Anand Rathi Securities

Anand Rathi Securities has recommended hold rating on Rolta India with a target of Rs 170, in its February 1, 2011 research report.

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Hold Rolta India; target of Rs 170: Anand Rathi Securities

Anand Rathi Securities has recommended hold rating on Rolta India with a target of Rs 170, in its February 1, 2011 research report.

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Ashish Chaturmohta (more)

Vice President Retail Research (Derivatives and Technical Desk), | Capital Expertise: Equity - Technical

Anand Rathi Securities has recommended hold rating on Rolta India with a target of Rs 170, in its February 1, 2011 research report.

“Rolta India sold its 50% stake in Shaw-Rolta, effective 31 Dec ’10, for USD 27.5 million and an additional USD 8m over the next two years. Rolta used to consolidate revenue of ~USD 3.5m a quarter to its EDA division. The absence of this, hereon, would dampen revenue and earnings growth going forward.”

“Rolta India’s US dollar revenue rose 3.4% qoq (to USD 98.5 million), while its margin was 27bps lower qoq in 2Q, as per our estimates. Its order book grew 1.1% qoq to Rs 19bn (including a ~9% decline in EDA due to the stake sell-off). Rolta saw 439 employees leave (including those lost due to the JV sell-off), decreasing the total base to 4,212. Billing rates were up 1.3% and 0.7% for GIS and EDA businesses respectively, while remaining flat for EICT. Rolta saw a one-off gain of Rs 761m on account of its JV stake sale.”

“We lower our FY11e/FY12e/FY13e earnings 5.3%/14.6%/10.2%, mainly on lower revenue and earnings due to the sell-off and salary hike from Jul ’11. Our target price of Rs 170 implies a target multiple of 10x Mar ’12e earnings. Our target PE is at 50% discount to the average PE of large-cap IT stocks (FY12e PE of 20x). Downside risk: equity dilution; upside risk: non-annuity based revenue-increases in clients’ capex programs. We lower our price target to Rs 170 from Rs 220, while maintaining our Hold rating,” says Anand Rathi Securities research report.

Disclaimer: The views and investment tips expressed by investment experts on moneycontrol.com are their own, and not that of the website or its management.Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

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