CRISIL raises Helios and Matheson`s fair value to Rs 106

CRISIL Research's report on Helios and Matheson Information Technology

"Helios and Matheson Information Technology Ltd's (Helios') Q1FY14 results (financial year - ending September) were largely in line with CRISIL Research's expectations. In rupee terms, consolidated revenues grew 3.8 percent q-o-q to Rs 1,998 mn driven by volume growth. In dollar terms, revenues grew by 4.5 percent q-o-q to USD32.3 mn. The average rupee dollar exchange rate was Rs 61.7 in Q1FY14 compared to Rs 62 in Q4FY13. EBITDA margin improved 78 bps q-o-q to 22.4 percent largely because employee utilisation improved by 20 bps to 75.6 percent. PAT grew 3 percent q-o-q to Rs 159 mn. The management expects a healthy deal pipeline going forward. Accordingly, it has planned a gross addition of 1,000 employees over the next four quarters. We expect revenue growth estimate (in dollar terms) of ~19 percent and ~14 percent for FY14 and FY15, respectively. We expect average rupee dollar exchange rate to be ~Rs 62 in FY14 and FY15. We retain the fundamental grade of 3/5."

"We have raised our earnings estimates for FY14 and FY15 subsequent to revision of the USD/Rs  exchange rates. Accordingly, we raise our discounted cash flow based outstanding fair value estimate for Helios to Rs 106 from Rs 97 per share. At the current market price of Rs 120, the valuation grade is 2/5.

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