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>MAHINDRA SATYAM: Q4FY12 Results
Mahindra Satyam reported Q4FY12 numbers, which were marginally above our estimates. Reported revenues/PAT of | 1666 crore/| 534 crore were in line/ahead of our | 1653 crore/| 217.1 crore estimate. US$ revenues grew 3.7% QoQ while volumes grew ~ 1.9% QoQ. Q4 EBITDA margins improved 132 bps QoQ while FY12 EBITDA margins improved 800 bps YoY. Management commentary suggests deceleration in discretionary spending in the US and Europe and could likely pressure pricing in the near term. Consequently, we maintain our HOLD rating.
■ Earning summary
Q4FY12 US dollar revenues grew 3.7% QoQ to $337 million ($325 million in Q3) while those in rupees declined 3% QoQ (3.8% decline estimate) to | 1666 crore (| 1653 crore). PAT increased by 73.2% to | 534.2 crore from | 308.4 crore in Q3 and above our | 217.1 crore estimate. Note that reported PAT was aided by exceptional items (| 109.4 crore) and tax write back (| 91.3 crore). Quarterly performance was also aided by 10% reduction in the operating expenses to | 353.9 crore (| 399.1 crore in Q3) led by cost rationalisations.
■ Operating metric highlights
Across geographies, revenues from North America (51% of Q4FY12 revenues), Europe (24%) and rest of world (25%) grew 5.8% QoQ, declined 0.5% QoQ and grew 3.7% QoQ, respectively. Telecom, media and entertainment grew 14.6% QoQ, whereas manufacturing,
■ Valuation
We expect FY13E US$ revenues to grow 11% while rupee revenue/EPS could grow/decline 13%/18%, respectively. Further, we model revenues/EPS to grow 12%/8% in FY14E. This translates to revenue CAGR of 16% during FY11-14E period. Further, we expect EBIT margins to improve by 120 bps in FY13E. We assign a lower target PE multiple of 8x (our CY13E estimate) vs. 9.1x (FY13E estimate) to account for the mediocre earnings growth. Consequently, we value the company at 8x our CY13E EPS estimate of | 9.6 and maintain our | 75 target price.
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