Hold Take Solutions; target of Rs 43: Nirmal Bang

“Take Solutions, during Q1FY12, the company’s revenues grew by 46% YoY and 6% QoQ at Rs.158.6 crore. This was on the back of increase in revenues from the existing clients in both segments - SCM and lifesciences. EBDTA margins remained flat YoY while they moved up 190 bps at 21.5% during the quarter. PAT moved up 50% YoY, 5.5% QoQ at Rs.21.6 crore. This was lower due to higher tax rate. EPS for the quarter stood at Rs.1.8. EBIDTA margins remained flat at 21.5% YoY during the quarter. The vertical mix of the company in FY11 was of 53 : 41 of SCM and Lifesciences respectively. However, post WCI acquisition, revenues from lifesciences segment would move up to around 55-60% where they have higher margins of ~26-27%. The company drew 65% of its revenues from U.S.A. Post WCI acquisition, Take has entered into European markets where their synergies would bring in better geographical mix for the company. This would reduce dependence of revenues from USA. The current orderbook of the company stands at USD 72.5 million which has moved up by 40% YoY. The strategic acquisition of WCI has widened the product portfolio for Take sol and also opened up newer markets.”

“The company has given guidance of 6-7% QoQ growth for the next 2 to 3 quarters. WCI is expected to post better results in 2nd half of the year. For the whole year it is expected to contribute ~ Rs.90 crore to the revenues. EBIDTA margins are expected to move up in the range of 22-23% for the company. At the current price of Rs.34.5, TAKE is trading at a PE of 4.8x FY12 estimated EPS & 3.59x FY13 estimated EPS. Considering the current global meltdown, we are assigning a lower target PE multiple of 6.0x (against earlier 7x) and arrive at a target price of Rs.43 per share for TAKE indicating a potential upside of 25% from current levels. We recommend to Hold the stock,” says Nirmal Bang research report.

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