Accumulate Mahindra Satyam; target of Rs 115: Angel Broking

Angel Broking is bullish on Mahindra Satyam and has recommended accumulate rating on the stock with a target of Rs 115 in its October 30, 2012 research report.

“Mahindra Satyam (Satyam) reported broadly in-line set of results for 2QFY2013, with robust operational performance. The major highlight of the result was almost flat qoq operating margin despite giving wage hikes during the quarter. Satyam has successfully addressed its key concern areas in the past three years of client mining, employee retention, margin expansion, and dispute resolution. The company is back on its growth track after three years of metamorphosis undertaken by Tech Mahindra’s management post its acquisition in June 2009.”
“For 2QFY2013, Satyam reported a revenue of US$354mn, up 3.5% qoq, led by a 2.8% qoq volume growth. In INR terms, the revenue came in at Rs1,938r, up 3.1% qoq. The company’s EBITDA margin remained almost flat qoq at 21.5% despite having the negative impact of wage hikes. This was due to reduction in sub contracting, visa and travel costs. The PAT came in at Rs278cr, impacted by forex loss of Rs86cr as against a gain of Rs66cr in 1QFY2013.”
“The management mentioned that there is a definite improvement in the number of deals that the company is getting invited for and there’s been a distinct uptick in the win ratios vs a year ago. Satyam has successfully addressed its key concern areas in the past three years of client mining, employee retention, margin expansion, and dispute resolution. Satyam has enterprise business solutions (EBS; ~40% of its revenue) and manufacturing (~34% of its revenue) showing modest traction. We expect the company’s core competence in EBS to supplement growth and post a 10.7% and 12.8% CAGR in USD and INR revenue, respectively, over FY2012-14E. The company continued to deliver operational exuberance with a healthy volume growth. On the EBITDA front, the company is expected to post a 22.2% CAGR over FY2012-14E. We value the stock at 11x FY2014E EPS, which gives a target price of Rs115. We maintain our accumulate rating on the stock,” says Angel Broking research report. Public holding more than 90% in Indian cos Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies 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. To read the full report click on the attachment

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