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Hughes Software does it again - Views on News from Equitymaster
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  • Jan 8, 2001

    Hughes Software does it again

    Hughes has reported a jump (QoQ) in topline by 27% and the net profit has gone by up 40% in 3QFY01. On a YoY basis net profit grew by 28% and revenues by 86%.

    (Rs m) 2QFY01 3QFY01 Change
    Sales 444 563.3 26.9%
    Other Income 33 26 -20.0%
    Expenditure 296 362 22.5%
    Operating Profit (EBDIT) 148 201 35.6%
    Operating Profit Margin (%) 33.4% 35.7%
    Interest - -
    Depreciation 35 37.5
    Profit before Tax 146 190 29.7%
    Other Adjustments 3 0
    Tax 12 5.8
    Profit after Tax/(Loss) 131 184 40.0%
    Net profit margin (%) 29.6% 32.7%
    No. of Shares (eoy) (m) 16.7 33.3
    Diluted number of shares 33.3 33.3
    Diluted Earnings per share* 16 22
    *(annualised) 48 35

    Hughes, the telecom software majorís result in 3QFY01 has shown why Indian software companies are so interested in this area. Both operating and net margins have improved significantly this quarter. This is due to the higher billing rates in this area. This quarter Hughes has announced partnership with Adax of Europe for implementing voice over Internet (VoIP) and 3G (3rd Generation) mobile telephone solutions.

    The revenue mix has changed according to expectations that it would de-risk business from parent Hughes Network Systems (HNS) by adding more clients. However, we had expected the contribution of products to increase further which has remained constant. For 2QFY01 contribution from HNS was 37% and that from others was 34%.

    The major cost component was employee costs that came to around 30% of sales.

    Hughes is projected to grow to Rs 1724 m for FY01E according to our estimates. For the year at the end of nine months Hughes has already clocked Rs 1,365 m. Therefore the Company will overshoot expectations. Assuming, 4QFY01 earning is same as that for the third quarter then it will record a YoY growth over FY00 of around 80%.

    At the current market price of Rs 781 Hughes is trading at a P/E multiple of 48 times its 3QFY01 annualised earnings.



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