Mahindra Satyam Ltd Results – What to expect tomorrow?

Satyam came out with their Q3 results after the end of trading today. The salient points in their result are:

1. Consolidated Revenue up 34% YoY and 9% QoQ at Rs1718 Crore
2. 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).

Infosys Q3 FY12 Results – Is the 8.4% fall justified?

Consolidated results for the quarter ended December 31, 2011 were reported by Infosys today. The highlights of the same are:

1) Revenues were Rs 9,298 crore for the quarter ended December 31, 2011; QoQ growth was 14.8%; YoY growth was 30.8%

2) Net profit after tax was Rs 2,372 crore for the quarter ended December 31, 2011; QoQ growth was 24.4%; YoY growth was 33.3%

3) Earnings per share (EPS) was Rs 41.51 for the quarter ended December 31, 2011; QoQ growth was 24.4%; YoY growth was 33.3%

The results beat most of the market expectation. But the flat earnings projection (QoQ) for the last quarter of the year owing to volatile economic environment especially in the Euro zone dampened the mood and the stock of the company fell 8.4% by the end of the trading session. Now the question is: Is this fall justified?

Let us take a look at the Q4 guidance given by Infosys:

1)     Revenues are expected to be in the range of Rs 9,391 crore and Rs 9,412 crore

2)     Earnings per share (EPS) is expected to be Rs 42.12

Although this is almost flat QoQ, but if we consider the YoY implications of this guidance, revenues are expected to grow by 29.5% to 29.8% and EPS by 32.4%. This is a rather impressive YoY growth which was last seen during FY2008-09 for Infosys. For the past two years, the EPS growth was rather sluggish as compared to this. But is this stock fall owing to a drastic reduction in value of the company?

Analysis of Great Offshore Ltd Results

I was pleasantly surprised when Great Offshore came out with the results today stating their net profit was up from Rs 26.73 Cr to Rs 54.90 Cr, a whopping 105% growth Y-o-Y. Amidst the relatively poor showing by the industry in the recent past, this seemed a silver lining. But on closer inspection, these clouds of delight evaporated.

Their income from operations was down from Rs 235.9 Cr to Rs 218.59 Cr. But the contributor to their bottom line was not their operations, but profit from sales of vessels, which amounted to Rs 47.85 Cr before tax. Now if we remove this figure from the PBT, the amount goes down from Rs 92.9 Cr to Rs 45.05 Cr. And this is excluding the taxes. If we consider 40% corporate tax (the amount by which they deducted their tax), the PAT comes down to Rs 27.03 Cr.

Thus, the actual growth of the company was by a marginal 1.12%. Considering this, their EPS for Q1 was 7.26. The stock of the company was down by 1.05% at 211.85, trading at a current PE multiple of 7.29, which considering the lack of significant operational growth can be justified.

For the moment, I would rather stay away from this stock.

Analysis of Opto Circuits India Ltd Results

Opto Circuits India Ltd is a medical equipment manufacturer with presence in India and Abroad. The Q1 results for the same were exceedingly good. On a Y-o-Y standalone basis, net profit increased marginally from Rs 56.95 Cr to Rs 57.13 Cr. But the more attractive figures come from the consolidated results. The net profit has increased from Rs 83.09 Cr to Rs 116.38 Cr (Y-o-Y). This has led to an EPS increase from Rs 4.46 to Rs 6.24.

Opto Circuits India Ltd, in itself has not grown much and is itself purely in healthcare segment. But the subsidiaries are more attractive with interests in IT as well. The most important information out of the results is the exceedingly good performance by the subsidiaries. The profit from the subsidiaries has increased from Rs 26.14 Cr to Rs 59.25 Cr, indicating a whopping growth of 126%. The International Health care business has reported a significant gain in revenues by almost 51%. 

The most significant concern for the company could be exchange rate risk, as the majority of the sales as well as the profits come from the international business. Profits from domestic segment as well as the margins here are very small.

The current EPS (I assume it to be 4 times latest EPS) is 24.96. This means that the stock is currently trading at a PE multiple of around 11, which is very low as compared to the industry (20.8). Moreover, for such a growth rate that they are experiencing, Opto Circuits may be considered a value buy.

I will post a better analysis as soon as I get their annual report for FY2010-11 and have a look at their balance sheet.

Analysis of Biocon Ltd Results

When I first saw the FY11 Q1 results of Biocon, I was really disappointed. But on taking a closer look, there were some positives as well. Although the standalone net profit was down from Rs 72.3 crores to Rs 60.4 crores, their consolidated net profit from continuing operations (their subsidiary had sold its subsidiary) was marginally up by 7% from Rs 65.22 crore to Rs 70.05 crore. These figures indicate two important things:

1)    The domestic profitability has taken a hit
2)    The subsidiaries, many of whom are foreign, have turned profitable