Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.

Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Digital: Rapid growth - Views on News from Equitymaster
  • E-MAIL
  • A  A  A
  • Jan 22, 2001

    Digital: Rapid growth

    Digitalís performance in 3QFY01 is highlighted by a sequential growth of 30% in revenues and a 6% increase in operating margins. The feat by all counts is commendable. One of biggest positives about Digital is its quality of management. The team has a right mix of talent and experience. The performance is more than evident from Digitalís 3QFY01 results.

    If we look at the performance of the company in the current fiscal itís revenues have jumped from Rs 283 m in the first quarter to Rs 526 m in the third. This means it has already clocked a growth of 98% in three quarters compared to FY00. The companyís operating margins have gone up from 15.5% in 1QFY01 to 31.4% 3QFY01.

    The major concern with the company still looms, as 87% of its business comes from Compaq. The figure has not changed significantly since the last quarter. The company is trying to de-risk its client concentration. The non-Compaq revenues grew by 66% compared to 2QFY01, while revenues from Compaq grew by 26%.

    Digital : Due diligence

    The geographic break up of revenues changed with contribution from the US coming down from 82% in the last quarter to 79% in 3QFY01. The sales to Europe grew by 4% compared to 2QFY01. The figure stood at 17% of the revenues. The remaining revenues were from the Asia Pacific region. Decrease in the contribution from the US may be due to an effort to de-risk business from the region.

    The onsite contribution was up to 68% compared to 65% in 2QFY01. The offshore contribution was 32%. This change in onsite-offshore mix did not affect the operating margins, which on the contrary went up.

    (%) of revenues from 2QFY01 3QFY01
    e-Applications 52 48
    System engineering 22 20
    e-Infrastructure 21 25
    Telecom 5 7

    Digitalís e-Applications division implements solutions in the area of enterprise applications integration with CRM (customer relationship management) software from SAP and Siebel. The contribution of this segment to the revenues is down 4%. This along with e-Infrastructure can provide Digital a steady stream of revenues for sometime to come.

    The systems engineering group that works with operating systems provides services to Compaq. This area could be a niche for Digital and considering the size of Compaq the potential to grow is healthy.

    Telecom group focuses on area like WAP, Bluetooth and wireless LAN (local area networks). Digital has prestigious clients like Sony and NEC for this group.

    Digital it seems all set to make it to the big league. The concern, which it needs to address, will be de-risking its client concentration. It recently completed acquisition of 20 acres of land to develop infrastructure for housing 4,200 software engineers. This is in addition to about a 1,000 odd already working for the company. This gives an indication of the pace of growth, which Digital has set for itself.

    At a current market price of Rs 615 the stock is trading at a P/E multiple of 42.4 times its 9 months annualised earnings in FY01. In light of this the stock may see positive activity in the days to come.



    Equitymaster requests your view! Post a comment on "Digital: Rapid growth". Click here!


    More Views on News

    Tech Mahindra: Our Revised View (Quarterly Results Update - Detailed)

    Aug 2, 2017

    A better than expected turnaround in performance results in a change in view.

    Wipro: A Decent Start to the Year (Quarterly Results Update - Detailed)

    Jul 27, 2017

    Digital services drive growth for Wipro in 1QFY18.

    Infosys: A Decent Start to FY18 (Quarterly Results Update - Detailed)

    Jul 14, 2017

    Infosys starts FY18 on an encouraging note with a stable performance.

    Ankit Shah's First Five Insider Recommendations (The 5 Minute Wrapup)

    Aug 5, 2017

    How to get exclusive insider recommendations from Ankit Shah.

    TCS: Currency Volatility Plays Spoilsport (Quarterly Results Update - Detailed)

    Jul 14, 2017

    TCS starts FY18 decently despite an adverse currency impact.

    More Views on News

    Most Popular

    A 'Backdoor' to Multibaggers: It's Like Investing in Asian Paints Ten Years Ago(The 5 Minute Wrapup)

    Aug 10, 2017

    Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.

    The Most Profitable Investment in the History of the World(Vivek Kaul's Diary)

    Aug 8, 2017

    'Yes, it looks like a bubble. And, yes, it's like buying a lottery ticket. But there's something happening that has never happened before. It's an evolutionary leap in money itself.'

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    Bitcoin Continues Stellar Rise(Chart Of The Day)

    Aug 10, 2017

    Bitcoin hits an all-time high, is there more upside left?

    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms

    S&P BSE IT

    Aug 18, 2017 (Close)