Geometric - Q1FY13 Result Update - Kotak

Geometric's 1QFY13 results were better than estimates, both at the revenue and the EBIDTA levels.

- USD revenue growth of 6.4% was brought in largely by a volume growth of 6.4%. Average realisations were almost flat QoQ. Volumes had grown by 5.1% in 4QFY12.

- EBIDTA margins were sharply higher QoQ, largely due to the rupee depreciation and deferral of some expenditure to future quarters.

- The company provided Rs.85 as one-time consultancy charges, as against Rs.27mn in 4QFY12.

- The amount of new orders booked was at $10.3mn as against $11.7mn during the previous quarter. The company is investing more in business generation activities, and will continue to do so, we believe.

- More focus on complete solutions has led to creation of offerings by combining the earlier diverse offerings. The company has also started a consulting practice to get into the client at an early stage.

- The management has also indicated greater focus on improving margins through levers like G&A leverage along with better utilization of the employee pyramid.

- Lower consultancy charges from 2Q should set-off the impact of expected rupee appreciation and the delayed expenditure.

- We have adjusted earnings estimates to accommodate for 1QFY13 results. Our earnings estimates stand at Rs.13.2 (10.6) for FY13, after accounting for one-off expenses. The improvement is partly due to the rupee depreciation.

- Our DCF - based price target works out to Rs.102 (Rs.82 earlier), based on FY13E earnings. We recommend BUY (ACCUMULATE earlier), looking at the attractive valuations.

- Geometric's revenue growth has been relatively high over the past few quarters and the order bookings should lead to decent growth going ahead. Our exit multiple works out to 8x FY13E EPS.

Source : Equity Bulls

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