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Research
Mahindra Satyam - 3QFY2013 Result Review - Angel Broking
Posted On : 2013-02-04 10:05:10( TIMEZONE : IST )
Mahindra Satyam (Satyam) reported broadly in-line set of results for 3QFY2013 on the revenue as well as operational front but the bottom-line disappointed due to exceptional loss of Rs.294cr because of Aberdeen claim settlement. Volume growth was decent at 1.5% qoq. The company added 33 new clients during the quarter. Satyam has successfully addressed its key concern areas in the past three years of client mining, employee retention, margin expansion, and dispute resolution. The company is back on its growth track after three years of metamorphosis undertaken by Tech Mahindra's Management post its acquisition in June 2009. We maintain Accumulate rating on the stock.
Quarterly highlights: For 3QFY2013, Satyam reported revenue of US$356mn, up 0.6% qoq. In INR terms, the revenue came in at Rs.1,940cr, almost flat qoq. The company's EBITDA margin remained almost flat qoq at 21.6%, aided by provision reversal of ~Rs.35cr. Adjusted PAT came in at Rs.374cr, up 35% qoq, aided by other income of Rs.111cr as against nil in 2QFY2013.
Outlook and valuation: Mahindra Satyam indicated that it sees better revenue growth in FY2014 aided by decent logo wins (it won two Fortune 500 logos and two Forbes Global 2000 logos during the quarter) and healthy deal pipeline across verticals such as manufacturing, retail and healthcare. It mentioned that there is a definite improvement in the number of deals that the company is getting invited for and distinct uptick has been seen in the win ratios vs a year ago. We expect the company to post a 9.7% and 15.1% CAGR in USD and INR revenue, respectively, over FY2012-14E. The Management indicated that the proposed Tech Mahindra - Satyam merger has been approved by the Bombay High Court, while it awaits the Andhra Pradesh High Court approval. On the EBITDA front, the company is expected to post a 27.9% CAGR over FY2012-14E. We value the stock at 11x FY2014E EPS, which gives a target price of Rs.126. We maintain our Accumulate rating on the stock.
