Kotak downgrades Mahindra Satyam after Q3 earnings

MUMBAI: Kotak Institutional Equities has downgraded Mahindra Satyam to ‘reduce’ from ‘add’ while keeping the target price unchanged at Rs 120.

The stock has done exceedingly well over the past few quarters and now trades at fair value, it says.

According to the brokerage, the company’s 3QFY13 muted revenue growth of 0.6 per cent was impacted by furloughs in high tech and manufacturing segments. It is of the view that Satyam will have to do a lot more to close out growth rate with peers. The slowdown in bagging new deals is likely to keep it under pressure.

The brokerage attributes this slowdown to the elongated closure of deals that the company is participating as also the company has been unexpectedly shot out in the final stages in a few deals, possibly due to lack of aggressive investment in industry/analyst relationships or just bad luck.

“We downgrade TM/Satyam to ‘reduce’ from ‘add’ after 46 per cent absolute performance over the past 6 months. We have updated estimates for the recent quarter performance and revised Re/USD forecast. We forecast consolidated revenue growth (including acquisitions) of 7.9 per cent and 12.4 per cent in FY2013E and FY2014E, down from 8.4 per cent and 13.9 per cent earlier,” the report said.

The stock was at Rs 117.45, down 2.04 per cent, on the BSE. It touched a high of Rs 119.20 and a low of Rs 117.25 in trade today.