>3I INFOTECH (ICICI Direct)

Decent show…
3i Infotech announced flat q-o-q top line at Rs 607 crore, which was in line with our expectation. EBITDA margin improved 157 bps sequentially driven by improvement in gross margins in the products and services segment. The company has also been able to maintain gross margin in the transaction services segment. Buy-back of FCCB and one time advisory and legal fee payment led to profits increasing to Rs 90.5 crore (profit removing these exceptional items increased 3.3% to Rs 67 crore).

Highlight of the quarter
The flat q-o-q performance by the company was primarily a result of the poor performance of the services segment which saw de-growth of 11% qo-q. Transaction services segment was comparatively the best performing segment with sequential growth of 6.2%. Product revenue bounced back this quarter with 3.1% q-o-q growth in Q4FY09 (compared to q-o-q degrowth
of 4.5% in Q3FY09. the company has bought back FCCB worth Rs 152 crore during the quarter. For the full year FY09 the company grew 89.6% on the top line. More than 50% of this growth was contributed by the acquisitions made by the company during the year.

Valuations
3i-infotech has an outstanding order book of Rs 1445 crore which is 56% of FY09 revenue. The order book growth has slowed down in the recent past. The management has also refrained from giving guidance for FY10 due to the uncertain demand environment. We recommend a Hold rating on the stock with a revised price target of Rs 49.

To see full report: 3I INFOTECH