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Research
CMC - All round performance ? beat expectations - Prabhudas Lilladher
Posted On : 2013-01-14 09:11:01( TIMEZONE : IST )
CMC reported Q3FY13 results exceeding our/consensus expectation. The revenue growth has been consistently supported by SI (CQGR of ~9% over the last three quarters), while ITES remained relatively muted in Q3FY13. The margin profile continues to be stable as reiterated by the management. We reiterate our ?Accumulate' rating, with a revised target price of Rs1,350 (from Rs1,270) as we revise our estimates up for better growth and margin expectation.
- Revenue beats expectations, margins in stable zone: CMC reported revenue growth of 7.5% QoQ to Rs4,926.8m (PLe: Rs4,720m, Cons: Rs4,812m). However, excluding SEZ, top-line grew by 8% QoQ to Rs4,824.9m. EBITDA margins improved by 19bps at 16.8% (PLe: 17%, Cons: 16.6%), on account of better volume growth accompanied with operational efficiency and productivity. PAT improved by 23.6% QoQ to Rs610.6m (PLe: Rs562m, Cons: Rs570m), on account of lower tax (Q3FY13: 23.7%, Q2FY13: 31.5%) & higher other income.
- Offshore leverage to be pushed to FY14: The management is confident of maintaining EBITDA margin in 15-17% range despite rupee appreciation. We expect offshore leverage to kick in from Q1FY14 which will aid margin expansion (Q3FY13 Offshore share: 23% of International business).
- Conference call highlights: 1) TCS' contribution at ~58% (Q2FY13: 56%) 2) CMC Americas grew 14% QoQ & 36% YoY in USD terms 3) CMC International business (~68% of revenue) grew 11% QoQ & 38% YoY 4) 26 new clients added in Q3FY13 (Q2FY13: 15) 5) Forex gain in Q3FY13 at Rs34m 6) DSO - 81 days (Q2FY13: 83) 7) Cash & Cash equivalents: Rs2,180m (Investments: Rs1,130m) 8) Employee count: 11,224 (Permanent: 4,743) 9) 10) Capex: Rs220m (9MFY13: Rs670m) 11) Experiencing good traction in SI, Embedded & real time systems, focus on emerging trends i.e. big data, analytics, cloud etc.
Valuation & Recommendation: We expect the revenue momentum to stay in the mid-twenties, with a stable margin profile. We reiterate 'Accumulate?, with a target price of Rs1,350, 14x FY14E earnings estimates.
