Mahindra Satyam - Q3 meets estimates - Aditya Birla Money

Mahindra Satyam Q3 meets estimates; positive outlook for Q4 & FY14 and settlement of all abroad legal litigation would act as a positive; Buy on dips

During Q3FY13, Mahindra Satyam (MS) reported a mute $ term revenue growth of 0.3% to $355.6 mn from $354.6 mn on sequential basis. In rupee terms, revenue remained flat on QoQ basis at Rs. 19.39 bn. BFSI witnessed a strong growth of 5.3%, whereas other verticals remained soft on back of furlough and delays in client ramp-ups ($ terms QoQ). On geographical front, Europe witnessed a healthy growth (9.4%) and US remained soft on QoQ basis. Reported EBITDA & margin remained flat, which include one-offs (provisions reversal in Employee cost worth Rs. 33 cr and technical charge worth $4 mn). PAT dropped by 71.2% to Rs. 0.79 bn, including extraordinary item worth Rs. 2.94 bn for Aberdeen (UK) litigation. Adj. PAT increased by 34.6% to Rs. 3.74 bn.

Q3 results were in-line with estimates on revenue front, above estimates on margin (thanks to one-offs) and adjusted PAT basis. We believe that the stock's recent strong run-up and relatively mute revenue growth compared to its large peers would invite profit booking in the very short term.

However, the management painted an optimistic outlook for both Q4 & FY14 and settlement of all outside-India legal cases would act as a positive trigger for the stock. We advise investors to use any correction to accumulate the stock, as it remains one of the best pick in the medium to long term.