Accumulate Rolta India; target of Rs 85: PLilladher

Prabhudas Lilladher is bullish on Rolta India and has recommended accumulate rating on the stock with a target of Rs 85 in its October 23, 2012 research report.

“Rolta reported Q1FY13 revenue above our expectation but margins below expectation. The company continues to see benefits from its IP-driven solutions, which has helped in supporting the revenue growth. As Rolta moves away from the services business to IP-driven business, we continue to see subdued earnings performance in H1FY13. We retain our ‘Accumulate’ rating.”

“Rolta reported revenue growth of 5.6% QoQ to Rs4,701m (PLe: Rs4,591.3m, Cons: Rs4,616m). EBITDA margin contracted significantly by 940bps QoQ to 45.2% (PLe: 53%, Cons:52.2%), mainly due to decline in margins of EGES (2214bps) & EITS (220bps) QoQ, respectively. However, EPS grew by 32.4% QoQ to Rs3.9 (PLe: Rs2.4, Cons: Rs2.86), due to higher other income and lower depreciation cost. Order book grew by 3.0% QoQ to Rs22,062m, strongest growth in the last five quarters. EGES order book grew by 2.6% QoQ, whereas EITS grew by 3.2% QoQ, respectively. The company’s decision to move away from low-end services business to high-value solutions based on IP, could put pressure on the order book. We expect order book to remain volatile in the near term.”

“We believe that volatile earnings is a matter of concern for the company. We also believe that a high interest cost and a weak business environment could result in decline at the bottom-line. We retain our ‘Accumulate’ rating, with a target price of Rs85, 6x FY13e earnings estimates,” says Prabhudas Lilladher research report.    

Public holding more than 90% in Indian cos  

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