Satyam came out with their Q3 results after the end of
trading today. The salient points in their result are:
- Consolidated Revenue up 34% YoY and 9% QoQ at Rs1718 Crore
- Consolidated PAT stood at Rs 308 Crore, a rise of 29% QoQ and 424% YoY
A major point to be noted is that the pre-tax “Other Income”
surged by 56.4% to Rs 151.3 crore. The EBITDA stood at increased by a
relatively modest 15.1%. The EPS for Q3 was reported at Rs 2.62. The nine month
EPS stood at Rs 6.56. In absence of Q4 guidance, for a back-of-the-envelope
calculation, if we annualise this EPS, we get an EPS of Rs 8.75. But on the
other hand, if a performance equivalent to this quarter were to come (flat QoQ
growth), then the EPS for the year ending March 2012 would stand at Rs 9.18.
Now, the IT industry average P/E multiple is around 20, while
at the present annualised P/E multiple, Satyam trades at 8.7. Considering the
P/E multiple based upon the H1 EPS which stood at 2.52 (Annualised value of Rs 5.04),
the stock was trading at a multiple of 15. With the better results for the
company in the last quarter (EPS for Q3 was greater than that of H1 combined)
the stock would be trading at a far lower multiple of 9 if it does not grow
tomorrow.
Hence, I would buy Satyam and set a target of Rs 100-110
(When a current P/E multiple of 12-13 would be achieved).
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