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April 30, 2001
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Money > Business Headlines > Report April 30, 2001 |
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DKW puts a 'buy' on SatyamNetScribes/Salil Panchal Global investment bank Dresdner Kleinwort Wasserstein has recommended a 'buy' on Satyam Computer Services. DKW has put a one-year price target of Rs 250. Strong interim results, as reflected in strong topline growth and a healthy order book, are the factors behind the optimism on the stock. The report states that Satyam's Q4 net profit of Rs 1.1 billion beat the consensus estimates and the earnings growth is topline-driven. "Billing rates and utilisation levels were largely maintained. The EBITDA margin fell by 50 basis points compared to the previous quarter, but better than our expectations," said the report. "The new client numbers for Satyam are impressive. With over 12 clients who account for over $5 million annually and 44 clients with annual billing of at least $1 million each, the near future is certainly rosy for the company," said Manish Agrawal, software analyst at Pranav Securities. "The company must have realised that it had excess capacity, and thus stopped hiring. Also, it could be an effect of the slowdown, wherein it stopped hiring to improve margins," he added. Satyam's order book is up 7 per cent to $240 million. It has added 32 new clients during the latest quarter, including Chase Manhattan and State Bank of Mauritius. It has also signed a large offshore outsourcing agreement with Ford Motor during the quarter. "Maintaining a 37 per cent margin is impressive. The fear is that the slowdown might hit margins in a couple of quarters and that is something that the company needs to look out for," said Agrawal. According to DKW report, the stock trades at an attractive PE of 17.4 times its expected 2001-02 consolidated earnings. "We forecast standalone earnings next year to rise by 45 per cent," stated the report. "The FII limit of 25 per cent in the company has been reached. We expect the management to increase the FII limit soon. We maintain a buy." From a technical point of view, the stock could continue sliding once it closes below its recent low of Rs 160, while support can be expected at the Rs 100 and Rs 62 levels. The scrip closed at Rs 186.45 on Friday at the Bombay Stock Exchange, down from its previous close of Rs 219.70. |
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