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Satyam : Steady performance - Views on News from Equitymaster
 
 
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  • Jul 11, 2001

    Satyam : Steady performance

    On a QoQ basis, Satyam has posted a topline growth of 6.6% and a bottomline growth of 9%. Compared to 1QFY01 the revenues have grown by 76% and the net profits have grown by 141%. The company's topline has grown by a sober 6.6% compared to a significant 18% in 4QFY01. This could be due to the tough market environment the company has been facing.

    The operating margins continued to dip. In 1QFY02 operating margins have dropped by 110 basis points compared to 4QFY01.

    As expected the company's business mix shifted in favour of traditional business that has gone up from 23% of revenues in 4QFY01 to 30% in 1QFY02. This translates to a 37% sequential growth in the maintenance business. This could have caused the billing rates to decline, as in the maintenance business the margins are low. The revenues from e-commerce and telecom declined by 7% and 11% respectively. The shift towards maintenance business could bring in certainty in revenues but this would take a toll on the operating margins in the future.

    (Rs m) 4QFY01 1QFY02 Change
    Sales 3,866 4,119 6.6%
    Other Income (24) 91 -
    Expenditure 2,425 2,630 8.5%
    Operating Profit (EBDIT) 1,441 1,489 3.4%
    Operating Profit Margin (%) 37.3% 36.2%
    Interest 66 82 24.3%
    Depreciation 228 229 0.7%
    Profit before Tax 1,123 1,269 13.0%
    Tax 11 55 416.1%
    Profit after Tax/(Loss) 1,113 1,215 9.2%
    Net profit margin (%) 28.8% 29.5%
    No. of Shares (eoy) 281 314 11.8%
    Diluted Earnings per share* 15.8 15.5 -2.3%
    *(annualised)  -
    P/E (x) 10.9

    The revenues from North America region grew by 9% compared to the previous quarter (4QFY01). As a result, the contribution of the revenues moved up from 75% in 4QFY01 to 76% in 1QFY02. The revenues from Europe region have shown a growth of 37%. However, revenues from Japan and rest of the world declined by 30% and 9% respectively. The European markets too are slowing down. Therefore, a similar growth from the Europe region in the next quarter would be difficult for the company.

    The company's onsite offshore ratio did not see any significant change. The offshore business contributed to 58.6% of the total revenues.

    The highlight of the performance was that the company managed to add 27 new clients during the quarter. Satyam has finally put figures to the cautious optimism for the year. The company has given a guidance for a topline growth of 40%. The EPS is estimated to be between Rs 14.75 to Rs 15.75. This translates to a bottomline growth of 46% to 56%.

    At a current market price of Rs 168, the stock is trading at a P/E multiple of 11 times its 1QFY02 annualised earnings. Satyam valuations are quite low compared to its peers due to concerns about its loss making subsidiaries. However, the guidance is muted compared to Satyam's performance in FY01. This might cause valuations to head further south.

     

     

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