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Research
Mahindra Satyam - 4QFY2013 Result Update - Angel Broking
Posted On : 2013-05-18 22:03:57( TIMEZONE : IST )
Mahindra Satyam (Satyam) reported in-line net profit for 4QFY2013 while disappointed on the operational front. Volume growth was decent at 2.0% qoq. The company added 60 new clients during the quarter. Satyam has declared dividend of 30% (Rs. 0.6 per share) for the first time post 2009 crisis as the turnaround for Satyam is symbolically complete and the company now seems to be in good shape. We maintain our Buy rating on the stock.
Quarterly highlights: For 4QFY2013, Satyam reported revenue of US$359mn, up 0.8% qoq. In INR terms, the revenue came in at Rs. 1,936cr, down 0.2% qoq. The company's EBITDA margin declined by 146bp qoq to 20.1%, owing to normalization of provision reversal done in 3QFY2013. Adjusted PAT came in at Rs. 320cr, down 14% qoq, impacted by lower other income of Rs. 72cr as against Rs. 111cr in 3QFY2013.
Outlook and valuation: The new Management has proved its ability of turning around the company in three years' time by putting it back to comparable industry level growth and improving margins from 8.3% in FY2010 to 16.0% in FY2012 and 21.2% in FY2013. Management cited that the company is getting invited for more number of large deals but the win ratio of company still stands much lower than the industry standards. To focus on this, the company has set up a team to increase the momentum of deal wins. We expect the company's core competence in EBS to supplement growth and post a 9.2% and 8.5% CAGR in USD and INR revenue, respectively, over FY2013-15E. The Management indicated that the proposed Tech Mahindra - Satyam merger had been approved by the Bombay High Court, while it awaits the Andhra Pradesh High Court approval. Management indicated that hearings at Andhra Pradesh High Court are complete and the judgment has been reserved and expects that the judgment will become available in the first two weeks of June. We value the stock at 11x FY2015E EPS, which gives a target price of Rs. 126. We maintain our Buy rating on the stock.
