Mahindra Satyam - Operating Results broadly inline; OPM gains extends; Maintain BUY - Dolat Capital

View: Satyam has been delivering improved performance quarter after quarter. It has made commendable progress in its financial performance with 6 quarter Revenue CQGR of 6% (well ahead of peers) and 730bps improvement in the operating profitability. The pipeline continues to be robust (3 key deal wins in the quarter) and the strong hiring (added 791 employees in Q2FY13) indicates sustained business traction.

Revenue Inline: Mahindra Satyam reported Q2 FY13 numbers inline with our estimates with a Revenue growth of 3.1% QoQ at Rs.19.4bn (Revenue in USD 354mn inline with DE of USD 355mn).

Traction intact: IT services revenues grew 3.3% QoQ in Rs.terms whereas BPO grew by 2% QoQ driven by sustained business momentum across verticals (Manufacturing vertical witnessed QoQ growth of 6.5%). vCustomer contributed revenues to the tune of USD 4mn in Q2 inline with its annualized run rate of USD 16mn.

OPM gains extends: Operating profits grew by 4.6% QoQ (20bps gain QoQ to 19.3%) as it improved on efficiency through lower subcontracting cost and certain effort shift on to offshore which negated the 100bps impact of wage hike effective during the quarter. It has offered 1.5%/6% hike for its onsite/offshore employees. PAT for the quarter degrew by 21% QoQ at Rs.2.8bn ahead of our estimate of Rs.3bn as OPM gains were negated by sharp rise in Fx losses of Rs.840mn during the quarter.

Bombay court approves merger: It has received an approval from Bombay High court for the scheme of amalgamation of Tech Mahindra's various subsidiaries and MSAT - now the approval from AP court remains the only step to undergo.

Source : Equity Bulls

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