Hold Zylog Systems; target of Rs 47: Firstcall Research

Firstcall Research has recommended hold rating on Zylog Systems with a target of Rs 47, in its March 26, 2013 research report.

“Zylog Systems, established in 1996, is an ISO 9001 certified provider of Onshore, Offshore & Near shore technology solutions and services to enterprises & technology companies across the globe. The company works with some of the world’s leading innovative ISVs and software-enabled businesses, ranging from start-ups to establish industry leaders. Zylog Systems is a Public Limited Company, listed in the Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) in India. It provides complete Product Lifecycle Management services, ranging from new product development and product advancement to product migration, re-engineering, sustenance and support. By leveraging their experience in product engineering, they bring products to market faster, with high quality and reduced costs. As a certified ISO 9001:2000 company and being assessed for CMMI Level IV/V, ZSL continuously leverages cutting edge tools methodologies and benchmark standards to exceed the expectations of their customers.”

“Zylog Systems is providing of Onshore, Offshore & Near shore technology solutions and services to enterprises & technology companies across the globe, reported its financial results for the quarter ended 31st Dec, 2012. The third quarter witnesses a healthy increase in sales but decline the profitability on account of increase in salary costs & product development costs. The company’s net profit decreased to Rs.372.76 million against Rs.545.31 million in the corresponding quarter ending of previous year, a decrease of 31.64 percent. Revenue for the quarter rose 17.83 percent to Rs.6867.25 million from Rs.5827.93 million, when compared with the prior year period. Reported earnings per share of the company stood at Rs.11.33 a share during the quarter, registering 65.82 percent decline over previous year period. Profit before interest, depreciation and tax is Rs.1039.20 millions as against Rs.1141.16 millions in the corresponding period of the previous year.”

“At the current market price of Rs.40.50, the stock P/E ratio is at 0.87 x FY13E and 0.79 x FY14E respectively. Earning per share (EPS) of the company for the earnings for FY13E and FY14E is seen at Rs.46.68 and Rs.51.27 respectively. Net Sales and PAT of the company are expected to grow at a CAGR of 16 percent and 5 percent over 2011 to 2014E respectively. On the basis of EV/EBITDA, the stock trades at 1.44 x for FY13E and 1.18 x for FY14E. Price to Book Value of the stock is expected to be at 0.12 x and 0.11 x respectively for FY13E and FY14E. We recommend ‘HOLD’ in this particular scrip with a target price of Rs 47 for medium to long term Investment,” says Firstcall Research report.

Institutional holding more than 40% in Indian cos

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