Hold Rolta India; target of Rs 81: ICICIdirect.com

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Hold Rolta India; target of Rs 81: ICICIdirect.com

ICICIdirect.com has recommended hold rating on Rolta India with a target of Rs 81, in its February 6, 2012 research report.

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ICICIdirect.com has recommended hold rating on Rolta India with a target of Rs 81, in its February 6, 2012 research report.

"Rolta reported numbers which were below our estimates. Rupee revenues declined 2.9% QoQ and grew 6.9% YoY while PAT grew by 4.8% QoQ. The key highlights for the quarter were 1. Rs 13.4 crores provision made for market-to-market (MTM) losses on foreign currency loans. 2. 2.9% decline in order book to Rs 2,017 crores from Rs 2,076 crores, & 3. Likely revenue underperformance in subsequent quarters as indicated by management. EGDS rupee revenues declined by 6.6%, EITS grew by 2.1% whereas EDOS grew by 0.2% QoQ. Number of employees stood at 3,778, a decline of 216 employees QoQ. Refinancing of FCCB, due in June 2012, through ECB could likely create overhang. Consequently, despite maintaining our HOLD rating we recommend switching to large cap names."

"Reported revenues of Rs 471.7 crore (I-direct estimate: Rs500 crore) declined 2.9% QoQ. Consolidated PAT of Rs 65.2 crores, though below our estimate of |68.9 crore, grew 4.8% QoQ. Sequentially, EGIS EBITDA margins increased by 163 bps QoQ to 53.7%, EDOS EBITDA margins increased by 108 bps QoQ to 41.4% and overall EBITDA margins increased by 82 bps QoQ to 40.2%. Order book decline continues to be a concern. Management indicated that sharp rupee depreciation led to an increase in the total debt by 404 crores to Rs 1867 crores from Rs 1463 crores at the end of Q4FY11. We estimate, ~Rs 272 crores could be attributed to MTM losses, (using period end $Rs conversion rate of 44.69 and 53.01 for Q4FY11 and Q2FY12 respectively) and the increase in debt to be around Rs 132 crores. Management indicated FCCB refinancing is on track and could likely conclude in the next 3-4 weeks. Cash on books stood at Rs 48 crores as on Q2FY12."

"We expect the company to register revenue/PAT growth of 15%/21% CAGR during FY10-FY12E period. That said, we continue to value Rolta based on FY12E earnings due to the uncertain macroeconomic environment and revenue visibility. Consequently, we value the stock at 3.5x our FY12E EPS of Rs  23 i.e. at Rs 81 and maintain our HOLD ratin," says ICICIdirect.com research report.  

Public holding more than 90% in Indian cos

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To read the full report click on the attachment