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PSI's profits powered by Internet business - Views on News from Equitymaster
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  • Jul 22, 2000

    PSI's profits powered by Internet business

    PSI Data a 50.4% subsidiary of Groupe Bull of France has clocked a 144% rise in profits with the improvement in its YoY operating margins in 2QFY00. However if one were to compare the company's performance quarter over quarter, profits increased by 9%. The focus on the development work in the area of Internet based application and technologies helped it to maintain its margins.

    (Rs m) 1QFY00 2QFY00 Change
    Sales 183 206 12.7%
    Other Income 2 2 -7.7%
    Expenditure 136 159 17.0%
    Operating Profit (EBDIT) 47 47 0.4%
    Operating Profit Margin (%) 25.7% 22.9%  
    Interest 0 2  
    Depreciation 4 4 -7.6%
    Profit before Tax 45 43 -2.7%
    Tax 5 0 -99.4%
    Profit after Tax/(Loss) 39.90 43.42 8.8%
    Net profit margin (%) 21.8% 21.1%  
    No. of Shares (eoy) (m) 7.6 7.6  
    Diluted number of shares 7.6 7.6  
    Diluted Earnings per share* 21.1 23.0  

    All the three markets of the company viz. India, Europe and USA showed an excellent growth for the first half this year. Its revenues from Europe contributed 42% to its total revenue. PSI has already established a presence in Europe unlike other software companies which are focused on the US market. The MNC parentage is a great asset on which PSI has leveraged to create niche market in Europe. During the quarter 23% of PSI's business came was from Bull which will increase further to around 30% by the end of the year.

    In the current quarter Internet/Java business constituted 33% to its total revenues (25% in FY99). It has reduced its low margin hardware business to 8% and has no plans to execute any orders in future.

    At the current market price of Rs 783, PSI Data is trading at a P/E multiple of 34 times its 2QFY00 annualised earnings. The company's P/E multiple is comparatively lower than its peers in the industry. One reason is its higher onsite reveneues of around 55% where the margins are low. With its focus on Internet technology, e-commerce and strategic alliances, the company is likely to command premium valuations in time to come.



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