Merrill Lynch cuts target price of Sasken Communication
Merrill Lynch has cut the target price of Sasken Communication Technologies by 7% to Rs 140 and has retained ‘underperform’ rating on the stock
Sasken communication tech
RESEARCH: MERRILL LYNCH
RATING: UNDERPERFORM
CMP: RS 154.40
Merrill Lynch has cut the target price of Sasken Communication Technologies by 7% to Rs 140 and has retained ���underperform��� rating on the stock. Merrill Lynch has cut its FY09 and FY10 earnings estimates by 6% and 10%, respectively, to factor in sluggish Q1 revenue growth and muted Q2 revenue guidance in Sasken���s IT services business.
High attrition levels at 29% and potentially weak Q2 results remain cause for concern. The management has indicated that revenue growth in IT services can reduce to 17-20% y-o-y from 25-29% earlier. IT services revenues grew by 7.5% q-o-q - 1% lower than estimates - with EBITDA margins rising by 305 bps, driven by the rupee���s depreciation. Employee numbers fell and the management scaled down net hiring numbers from 700 to 500 for the year.
Sasken���s products business grew 112% y-o-y, though 60% came from customisation revenues and can be volatile. With a weak Q2 ahead and growth likely to be back-ended, the stock can languish at current levels
RESEARCH: MERRILL LYNCH
RATING: UNDERPERFORM
CMP: RS 154.40
Merrill Lynch has cut the target price of Sasken Communication Technologies by 7% to Rs 140 and has retained ���underperform��� rating on the stock. Merrill Lynch has cut its FY09 and FY10 earnings estimates by 6% and 10%, respectively, to factor in sluggish Q1 revenue growth and muted Q2 revenue guidance in Sasken���s IT services business.
High attrition levels at 29% and potentially weak Q2 results remain cause for concern. The management has indicated that revenue growth in IT services can reduce to 17-20% y-o-y from 25-29% earlier. IT services revenues grew by 7.5% q-o-q - 1% lower than estimates - with EBITDA margins rising by 305 bps, driven by the rupee���s depreciation. Employee numbers fell and the management scaled down net hiring numbers from 700 to 500 for the year.
Sasken���s products business grew 112% y-o-y, though 60% came from customisation revenues and can be volatile. With a weak Q2 ahead and growth likely to be back-ended, the stock can languish at current levels
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