CRISIL maintains fair value of Helios and Matheson at Rs 80
CRISIL Research has come out with its report on Helios and Matheson Information Technology (Helios). According to the research firm, the management of the company expects to further add 1,000 employees in the next four quarters which indicates a healthy deal pipeline.
CRISIL Research has come out with its report on Helios and Matheson Information Technology (Helios). According to the research firm, the management of the company expects to further add 1,000 employees in the next four quarters which indicates a healthy deal pipeline.
Helios and Matheson Information Technology Ltd’s (Helios’) Q2FY13 results (financial yearending September) were in line with CRISIL Research’s expectations. Consolidated revenues grew by 9.6 percent q-o-q to US$28.6 mn from US$26.1 mn in Q1FY13 driven by healthy growth in Helios’ top client. The company continued to receive strong business deals from existing and new clients. We maintain our earnings estimates and the fundamental grade of 2/5.Top client leads revenue growthIn rupee terms, consolidated revenues grew 10.4 percent q-o-q to Rs 1,532 mn driven by strong growth in Helios’ top client belonging to the banking, financial services and insurance (BFSI) industry. Revenues from this BFSI client grew 11.9 percent to Rs 113 mn on account of expansion of offerings. Accordingly, Helios’ BFSI segment (which constituted 36.9 percent of the revenue mix) grew 11 percent q-o-q to Rs 565 mn. The health care segment (which constituted 23.9 percent of total revenues) registered 10.9 percent growth sequentially.The top 10 clients constituted 49.1 percent of Q2FY13 revenues. During the quarter, the company added two clients, taking the total to 71. Almost 93 percent is repeat business.The US continued to dominate total revenues with 72.8 percent share.Employee cost rose due to net addition of 243 employees and salary hikesEmployee cost as a percentage of sales increased by 42 bps to 62 percent on account of (i) net addition of 243 employees during the quarter, taking the total to 2,889 billable employees and (ii) salary hike (10 percent for domestic employees and 2-3 percent for onsite employees). Despite employee costs increasing by 11.2 percent q-o-q to Rs 951 mn, EBITDA improved 11.1 percent q-o-q to Rs 335 mn following revenue growth. EBITDA margin remained flat at 21.8 percent in Q2FY13. PAT grew by 10.7 percent q-o-q to Rs 117 mn.The management expects to further add 1,000 employees in the next four quarters which indicates a healthy deal pipeline. The employee blended utilisation rose to 75.2 percent in Q2FY13 compared to 74.9 percent in Q1FY13. Attrition remains flat q-o-q at 12.1 percent.Debtor days improved
Debtor days have decreased to 81 days in Q2FY13 from 113 days in Q2FY12. Status quo on the litigation against promoter with reference to Vmoksha deal The litigation filed by Vmoksha’s promoter, Rajeev Sahwney, against Helios’ promoters is pending in the magistrate court. The hearing is likely to come up in August 2013.Maintain earnings estimates, fair value retained at Rs 80
We maintain our earnings estimates for FY13 and FY14. CRISIL Research has used the price to earnings multiple method to value Helios. Assigning a multiple of 4x FY14E EPS, we arrive at a fair value of Rs 80. At the current market price of Rs 49, the valuation grade is 5/5.Disclaimer: This report (Report) has been commissioned by the Company/Investor/Exchange and prepared by CRISIL. The report is based on data publicly available or from sources considered reliable by CRISIL (Data). However, CRISIL does not guarantee the accuracy, adequacy or completeness of the Data / Report and is not responsible for any errors or omissions or for the results obtained from the use of Data / Report. Opinions expressed herein are CRISIL's opinions as on the date of this Report. The Data / Report are subject to change without any prior notice. Nothing in this Report constitutes investment, legal, accounting or tax advice or any solicitation, whatsoever. The Report is not a recommendation to buy / sell or hold any securities of the Company. CRISIL especially states that it has no financial liability, whatsoever, to the subscribers / users of this Report. This Report is for the personal information of the authorized recipient only. This Report should not be reproduced or redistributed or communicated directly or indirectly in any form to any other person or published or copied in whole or in part especially outside India, for any purpose.CRISIL Limited . All Rights Reserved. Published under permission from CRISIL"
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