Dipen Shah of Kotak PCG says that Geometric Software's results were pretty much below expectations. He further adds that though on the topline they did show 10% QoQ growth, the margin impact was much higher than what they had anticipated.
As regards to Aztecsoft, he informs that they have been pretty bullish on the stock over the past several quarters. He adds that the company has a good record in terms of adding new clients and in mining deeper into the existing clients.
According to the headline figures of Zensar, Mehta believes that the results were much below market expectations. However, if one looks at their expectations, it is bang on target.
Excerpts from CNBC-TV18's exclusive interview with Dipen Shah:
What did you make of Geometric Software's performance this quarter?
The results were pretty much below expectations. Though on the topline they did show 10% QoQ growth, the margin impact was much higher than what we had anticipated.
If one looks at Geometric Software over the past four-five quarters, there has been uneven kind of a performance from the company and that has continued in the current quarter with the margins falling significantly.
What is more important for Geometric is that - post the acquisition, which they have announced, they will need to integrate it well. Obviously, it's a big acquisition that the company, on a base of $50 million, has acquired, something which could be about $30-35 million in revenues.
So we think that the most important aspect in Geometric now is the integration of the company, i.e. Modern Engineering Services business, which they have acquired and the future prospects will largely depend on how successful the integration is.
What would be your rating or recommendation on the stock, which has been uneven in terms of performance for the last few quarters. Would you like to downgrade or revisit your take on that stock and in the light of its recent performance?
Over the past two quarters for Geometric, we have had a kind of an under performer rating. We have not had a positive bias on the stock. More details are pending on the exact plans of integration and how it progresses. We would continue to recommend a hold probably with a negative bias.
What about Aztecsoft? What did you make of those numbers and where do you stand as a brokerage on that stock?
We have been pretty bullish on the stock over the past several quarters. In fact, if you look at the performance of the company, in terms of adding new clients and mining deeper into the existing clients, it has had a good record.
It obviously noted that the top five clients have grown by 10% on a sequential basis for the past several quarters. And in the current quarter also, 25% bottomline growth, on a sequential basis, was pretty much above estimates.
As far as the recommendation goes, we had recommended a 'buy', post this quarterly results. So we have positive bias, the stock has moved up over the past couple of days by about 25%. And as of now, we have a price target of about Rs 185 on the stock, to be very precise.
The last one from the midcap space Zensar - what do you have in terms of a target, both in earnings and price for that?
According to the headline figures, the results are much below expectations probably or much below
We had expected profits to be about Rs 12 crore and the reduction in the profits was expected to come because of salary increases, which the company had in the quarter. In our estimate, the impact was about Rs 4 crore.
On the topline growth, the company has been consistently reporting a good topline growth over the past few quarters. If one looks at the client base, it has got significant clients in terms of CISCO and P&O Nedlloyd and other companies.
So we believe that Zensar Technologies has been improving its client profile, it has been mining deeper, there is more stability, which has come into the revenue growth of Zensar over the last couple of quarters. We see adequate levers, which the company has for improving the profitability, going forward. So in terms of Zensar we had a positive bias. We do continue to be positive, our price target as of now stands at Rs 284.
What do you make of HCL Technologies numbers and what sort of earnings would you set out on that at more Rs 600, which is where it is trading now?
The results of HCL Technologies were once again very much in line. On the operational front, the EBITDA was as we had expected. The only difference, if we have to talk in terms of the bottomline, has been the higher other income and the lower taxation. These are very micro numbers. But overall, we have a positive bias on HCL Tech.
The company has been adding several large accounts. The company's transformational strategy has been working out. We can see that these accounts, which the company has added over the past few quarters have started ramping up, though the pricing has not been going up significantly as compared to its peers.
We remain comfortable with the existing revenue, our existing projections and the valuations.
Looking at PE or earnings, we have a Rs 38 EPS as of now for HCL Tech, and the price target would be about Rs 700.
What is your call on TCS?
The results were in line. Though I need to say that the headline numbers look above expectations. 8% revenue growth was very much there though it has been impacted to a certain extent by offshore.
The important point is the 300 bps improvement in the margins. But if we understand correctly from Monday's conference call there was a one-time component write back of about Rs 35 crore in this EBITDA and also the provisions had gone down significantly.
So these are the kind of figures, which we had not anticipated and probably could be one time. To that extent, if we adjust the earnings per share, it was very much inline. However, Infosys Technologies and TCS have made encouraging remarks about the macro picture.
There is no impact whatsoever of the slowdown, which is currently undergoing in the US. Also TCS' comments on billing rates were to our surprise. So just because of improvement in the macro picture, and just because of no impact as of now of the US slowdown, we tend to get more positive on TCS also and have suitably upgraded our estimates and targets.
Disclosures?
We have reports on that and our clients as well as our PMS department maybe having positions in these stocks.
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