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    Persistent systems Persistent systems Document Transcript

    • 1QFY2012 Result Update | IT July 18, 2011 Persistent Systems ACCUMULATE CMP `373 Performance highlights Target Price `424Y/E March (` cr) 1QFY12 4QFY11 % chg (qoq) 1QFY11 % chg (yoy) Investment Period 12 MonthsNet revenue 224 213 5.2 181 23.6EBITDA 40 38 5.3 34 16.6 Stock InfoEBITDA margin (%) 17.9 17.9 3bp 19.0 (108)bp Sector ITPAT 28 33 (16.8) 35 (20.2) Market Cap (` cr) 1,490Source: Company, Angel Research Beta 0.7For 1QFY2012, Persistent Systems (Persistent) reported numbers that were almost 52 Week High / Low 504/337in-line with the expectations on the revenue front, though its performance was Avg. Daily Volume 35,272marginally disappointing on the operating front. Management has maintained its Face Value (`) 10revenue guidance of US$220mn, i.e. 29% yoy growth for FY2012, and isconfident of maintaining PAT at least flat yoy, despite the surge in tax rates to 31% BSE Sensex 18,507from 7% in FY2011. The company is into pure-play offshore product development Nifty 5,567(OPD) and has been recording a 6% CQGR since 1QFY2011 on the back of Reuters Code PERS.BOcomeback in R&D spending by product companies. We recommend Accumulate Bloomberg Code PSYS@INon the stock.Quarterly highlights: For 1QFY2012, Persistent reported revenue of US$50.0mn, Shareholding Pattern (%)up 6.3% qoq, led by volume growth coupled with increased billing rates. Promoters 38.9In rupee terms, revenue came in at `223.8cr, up 5.2% qoq. Despite strongvolume growth, EBITDA margin remained stable qoq at 17.9% because of a MF / Banks / Indian Fls 25.1decline in IP-led revenue as well as promotions given during the quarter. FII / NRIs / OCBs 6.5PAT came in at `27.6cr, aided by higher forex gain of `6.4cr as against `2.9cr in Indian Public / Others 29.64QFY2011 on the back of ITM hedges of US$86.25mn with average contract rateof 47.39INR/USD. Abs. (%) 3m 1yr 3yrOutlook and valuation: Persistent, due to its niche focus on OPD, is expected to Sensex (3.1) 3.1 35.7witness a scorching revenue CAGR of 26.3% (in USD) over FY2011–13E,outperforming tier-I IT companies’ growth. Also, on the back of adequate margin Persistent (4.9) (23.2) - Note: Listed on April 6, 2010levers, the tailwinds mentioned above are expected to overplay the headwindssuch as 1) rupee appreciation and 2) competitive wage hikes in the medium term,thereby helping the margins to rebound to 18.4% and 19.5% in FY2012 andFY2013, respectively. At the CMP of `373, the stock is trading at 9.7x FY2013EEPS of `38.5. We value the stock at 11x FY2013 EPS, i.e. 45% discount to Infosys,and recommend an Accumulate rating on the stock with a target price of `424.Key financials (Indian GAAP, Consolidated) Y/E March (` cr) FY2010 FY2011 FY2012E FY2013E Net sales 601 776 984 1,195 % chg 1.2 29.1 26.8 21.4 Net profit 115 140 137 154 % chg 74.0 21.5 (2.1) 12.7 EBITDA margin (%) 24.3 20.4 18.4 19.5 EPS (`) 32.1 34.9 34.2 38.5 Srishti Anand P/E (x) 11.6 10.7 10.9 9.7 +91 22 39357800 Ext: 6820 P/BV (x) 2.1 2.0 1.7 1.5 srishti.anand@angelbroking.com RoE (%) 18.0 18.7 15.8 15.4 RoCE (%) 17.5 15.5 14.6 16.6 Ankita Somani EV/Sales (x) 1.9 1.5 1.2 0.9 +91 22 39357800 Ext: 6819 EV/EBITDA (x) 7.8 7.2 6.4 4.8 ankita.somani@angelbroking.comSource: Company, Angel ResearchPlease refer to important disclosures at the end of this report 1
    • Persistent | 1QFY2012 Result UpdateExhibit 1: 1QFY2012 performance (Indian GAAP, Consolidated) Y/E March (` cr) 1QFY12 4QFY11 % chg (qoq) 1QFY11 % chg (yoy) FY2011 FY2010 % chg (yoy) Net revenue 224 213 5.2 181 23.6 776 601 29.1 Cost of revenue 140 133 5.3 112 25.0 472 337 40.1 Gross profit 83 80 4.8 69 21.3 304 264 15.0 S&M expenses 18 16 7.7 14 23.8 62 46 33.5 G&A expenses 26 25 2.3 20 27.5 83 71 17.1 EBITDA 40 38 5.3 34 16.6 158 146 8.2 Depreciation 13 12 6.0 10 29.6 42 34 26.4 EBIT 27 26 5.0 25 11.4 116 113 2.7 Other income 6 6 3 17 8 Forex gain/(loss) 6 3 9 17 3 PBT 40 35 14.9 37 7.9 150 124 21.2 Income tax 12 2 628.2 3 382.6 11 9 17.3 PAT 28 33 (16.8) 35 (20.2) 140 115 21.5 EPS 6.9 8.3 (16.8) 8.6 (19.8) 34.9 32.1 8.8 Gross margin (%) 37.3 37.4 (11)bp 38.0 (71)bp 39.1 43.9 (478)bp EBITDA margin (%) 17.9 17.9 3bp 19.0 (108)bp 20.4 24.3 (394)bp EBIT margin (%) 12.3 12.3 (2)bp 13.6 (134)bp 14.9 18.8 (383)bp PAT margin (%) 11.7 15.0 (329)bp 17.8 (618)bp 17.2 18.8 (154)bp Source: Company, Angel Research Revenue momentum continues For 1QFY2012, Persistent reported revenue of US$50.0mn, up 6.3% qoq, primarily led by volume growth. Also, the company’s billing rates, onsite as well as offshore, improved by 2.3% and 1.3% qoq to US$13,033 per person per month (ppm) and US$3,770 ppm, respectively. The improvement in billing rates during the quarter was due to selling of high-end services like technology consulting, mobility and analytics. In rupee terms, revenue came in `223.8cr, up 5.2% qoq – lower growth as against dollar revenue due to 1.0% qoq INR appreciation against USD in 1QFY2012. Exhibit 2: Trend in revenue growth (qoq) 55 10 8.8 9 50 50.0 8 45 47.0 7 (US$ mn) 6.7 6.3 6 (%) 5.8 43.2 40 5 40.5 39.5 4 35 3 2.6 30 2 1QFY11 2QFY11 3QFY11 4QFY11 1QFY12 Revenue (US$mn) qoq growth (%) Source: Company, Angel ResearchJuly 18, 2011 2
    • Persistent | 1QFY2012 Result Update Exhibit 3: Trend in billing rates (qoq) 14,000 12,896 12,746 13,033 12,414 12,470 12,000 10,000 (US$/ppm) 8,000 6,000 3,600 3,601 3,661 3,723 3,770 4,000 2,000 - 1QFY11 2QFY11 3QFY11 4QFY11 1QFY12 Onsite Offshore Source: Company, Angel Research Industry wise, the company’s growth was led by the telecom and wireless segment (contributing 22.2% to revenue), which grew by 15.1% qoq, majorly led by European clients. The anchor industry segment – infrastructure and systems (contributed 67.9% to revenue) – continued its revenue traction and grew by 5.7% qoq. In absolute terms, revenue contribution from the lifesciences and healthcare segment stood modest; however, on a qoq basis, revenue declined by 6.0% due to base effect, as higher growth was reported in this segment in 2HFY2011. Exhibit 4: Growth trend in industry segments % to revenue % chg (qoq) % chg (yoy) Infrastructure and systems 67.9 5.7 19.9 Telecom and wireless 22.2 15.1 51.9 Lifesciences and healthcare 9.9 (6.0) 27.9 Source: Company, Angel Research Geography wise, growth was led by Europe, revenue from which grew by 35.7% qoq – whopping growth due to low base effect and ramp-up in revenue from few European clients. North America continued to grow during this quarter as well at 2.0% qoq. Exhibit 5: Growth trend in geographies % to revenue % chg (qoq) % chg (yoy) North America 82.8 2.0 23.2 Europe 7.4 35.7 44.1 Asia-Pacific 9.8 31.9 47.7 Source: Company, Angel Research Revenue contribution from IP-led services declined in 1QFY2012 to 6.1% from 10.3% in 4QFY2012 because of lower revenue from the company’s top customer that contributes almost 60% to the company’s IP-led revenue. Management has indicated that it is a one-time issue and revenue from the top customer is expected to scale up again in the coming quarters. IP-led revenue seems low also because of higher base in 4QFY2011, which was due to higher product sale from the top customer’s end in 3QFY2011, the royalty revenue of which got reflected inJuly 18, 2011 3
    • Persistent | 1QFY2012 Result Update Persistent’s account in 4QFY2011. The company expects IP-led revenue to touch US$25mn by the end of FY2012, i.e. whopping 68% yoy growth. Hiring and utilisation Persistent continued its modest hiring trend and added 260 net employees during the quarter. Gross addition during the quarter was 545. In the technical employee base of the company, 228 net employees were added. Attrition rate (LTM basis) declined significantly in 1QFY2012 to 18.4% from 19.6% in 4QFY2011, as the company gave wage hikes in 4QFY2011 to control attrition and, as a result, quarterly attrition rate in 1QFY2012 stood merely at 3.2% (quarterly annualised at 12.8%), leading to an overall decline in attrition rates on an LTM basis. Exhibit 6: Employee metrics Particulars 1QFY11 2QFY11 3QFY11 4QFY11 1QFY12 Technical 4,554 4,907 5,070 5,950 6,178 Sales 79 87 94 108 119 Rest 278 287 296 302 323 Total 4,911 5,281 5,460 6,360 6,620 Net addition 249 370 179 900 260 Attrition – LTM (%) 16.3 18.6 21.5 19.6 18.4 Source: Company, Angel Research For FY2012, management has a gross hiring target of 2,300 employees (1,000 freshers and 1,200–1,300 laterals) and a net hiring target of ~1,500 employees. Net utilisation (excluding resources in IP-led work) increased by 170bp qoq to 72.7%. However, in 2QFY2012, we expect utilisation to dip due to intake of freshers into the system. Management expects utilisation to inch up and reach 75–77% over the next 3–4 quarters. Exhibit 7: Utilisation trend 80 78.5 78 76 74.2 (%) 74 72.7 71.7 72 71.0 70 68 1QFY11 2QFY11 3QFY11 4QFY11 1QFY12 Utilisation (%) Source: Company, Angel ResearchJuly 18, 2011 4
    • Persistent | 1QFY2012 Result Update Margin profile In 1QFY2012, the company’s EBITDA and EBIT margins remained almost stable qoq at 17.9% and 12.3%, respectively, despite higher revenue growth due to higher costs incurred on account of promotions given in 1QFY2012 and drop in IP-led revenue. Going ahead, for 2QFY2012, the company has announced wage hikes — 7–8% for offshore employees and 4% for onsite employees, effective from July 1, 2011. This is expected to negatively affect the company’s operating margins by 200–220bp qoq in the next quarter. However, for the full year, the company expects margins to remain stable at FY2011 levels. Exhibit 8: Margin profile 45 40 42.2 35 38.0 39.1 37.4 37.3 30 23.0 21.9 25 (%) 19.0 17.9 17.9 20 15 17.6 16.5 10 13.6 12.3 12.3 5 1QFY11 2QFY11 3QFY11 4QFY11 1QFY12 Gross margin EBITDA margin EBIT margin Source: Company, Angel Research Client pyramid The client metrics of the company saw a qualitative movement with six new clients in the US$1mn–3mn revenue bracket. Also, four clients were added in the <US$1mn revenue bracket. In 1QFY2012, Persistent added 32 new clients, out of which eight were from the company’s partners. The total active client base of the company increased to 239 from 229 in 4QFY2011. Exhibit 9: Client metrics Particulars 1QFY11 2QFY11 3QFY11 4QFY11 1QFY12 Customers billed 196 201 207 229 239 <US$1mn 165 171 169 194 198 US$1mn-3mn 22 21 29 26 32 >US$3mn 9 9 9 9 9 Source: Company, Angel ResearchJuly 18, 2011 5
    • Persistent | 1QFY2012 Result Update Investment rationale Established footprint in the resurging OPD market Persistent has a dominant market share of ~16% (in CY2010) in the Indian OPD market. The company is witnessing a robust uptick in the deal pipeline as clients are flocking to generate new products in shorter time to market to capture market share. This is driving many ISVs and wireless equipment manufacturers to spend on R&D and engineering services. As per IDC, out of the global size of US$40bn in 2010 for R&D and product engineering, the Indian OPD market is just worth ~US$1bn. The global OPD market is expected to grow at a 14% CAGR to US$65.7bn by 2014. The offshore segment of the global OPD market in 2010 crossed the US$10bn mark and is expected to grow at a 19% CAGR to US$16bn by 2014. Exhibit 10: Worldwide R&D/PES spending (US$ mn) 70,000 25 60,000 18.2 19.1 20 17.9 16.3 50,000 13.2 15 (US$ mn) (%) 9.7 10.2 40,000 10 30,000 5 3.9 20,000 0 CY2006 CY2007 CY2008 CY2009 CY2010 CY2011 CY2012 CY2013 IT spending (US$ mn) yoy growth (%) Source: IDC, Angel Research   Exhibit 11: Worldwide R&D/PES offshore spending (US$ mn) 18,000 23.5 25 21.7 16,000 19.4 20 14,000 17.9 15 (US$ mn) 12,000 11.8 (%) 9.7 10,000 10 8,000 5 6,000 3.9 3.8 4,000 0 CY2006 CY2007 CY2008 CY2009 CY2010 CY2011 CY2012 CY2013 IT spending (US$ mn) yoy growth (%) Source: IDC, Angel ResearchJuly 18, 2011 6
    • Persistent | 1QFY2012 Result Update Non-linear services already a sizeable part of the portfolio Persistent has a sizeable portfolio coming in from IP-led revenue, which was ~9% in FY2011. The company expects it to scale up to ~11% in FY2012 and reach ~20% by FY2015. The company has been investing in the areas of 1) cloud, 2) analytics, 3) collaboration and 4) mobility, which are towards consulting. With the expected increase in contribution from IP revenue, the company is likely to benefit at the margin front because of its non-linear nature. Exhibit 12: IP-led revenue as a % of total revenue 12 11.4 11 10.2 10 8.8 9 8 (%) 7.2 7 6 5.2 5 4 FY2009 FY2010 FY2011 FY2012E FY2013E IP driven revenue (as % of sales) Source: Company, Angel Research Marquee clientele Out of its active clients, 37 have revenue of more than US$1bn and dedicated annual R&D budgets of 6–20% of revenue to drive product innovation. The company has marquee clients (with R&D budgets) including MNCs like IBM (~6.0%), Google (~12.8%), Microsoft (~13.9%), Oracle (~12.8%), Intel (~15.1%), Cisco (~13.2%), Nokia (~14%), Samsung, Yahoo (~17%) and eBay. In addition, the company’s client mining is strong as the company manages to get ~11% of its revenue from new clients vis-à-vis peers who get mere 3–5%. Exhibit 13: Revenue (CY2010/FY2010) and R&D budget as a % of sales 120 99.9 100 80 62.5 60 43.6 40.0 40 29.3 20 13.9 15.1 13.2 13.8 12.8 12.5 6.0 0 Microsoft Intel Cisco SAP Google IBM Revenue (US$ mn) R&D as % of sales Source: Company, Angel ResearchJuly 18, 2011 7
    • Persistent | 1QFY2012 Result Update Robust revenue growth with gradual improvement in margins Persistent is expected to report a robust revenue CAGR of 26.3% over FY2011–13E on the back of return in demand for OPD services. In fact the company has indicated net hiring to be 1,500 plus for FY2012E on the back of a strong deal pipeline. On the operating front, we expect margins to rebound in 2HFY2012 from 17.9% in 1QFY2012 to 18.4% in FY2012 and 19.5% in FY2013. We expect this margin improvement because of margin levers such as 1) employee pyramid rationalisation (indicated to hire 700 freshers out of 1,500 net people in FY2012); 2) higher revenue productivity due to the expected increase in IP-led revenue contribution; 3) gradual increase in utilisations to 74.7% in FY2013 from 72% in 1QFY2012 and 4) stable G&A in absolute terms even with higher growth. On the PAT front, we expect factors like 1) improvement in profitability and 2) forex gains due to In-the-Money (with average contract rate of 47.39INR/USD) hedges worth US$86.25mn to counter the headwinds due to higher tax rate of 31% compared to 7% in FY2011. Exhibit 14: Revenue expectations 300 250 28.8% 271.7 CAGR 200 221.4 (US$ mn) 150 170.2 127.9 127.3 100 50 FY2009 FY2010 FY2011 FY2012E FY2013E Revenue (US$ mn) Source: Company, Angel Research Exhibit 15: Margin expectations 31 30.1 29 27 24.3 25 (%) 23 20.4 21 19.5 18.4 19 17 FY2009 FY2010 FY2011 FY2012E FY2013E EBITDA margin (%) Source: Company, Angel ResearchJuly 18, 2011 8
    • Persistent | 1QFY2012 Result Update Outlook and valuation Persistent, due to its niche focus on OPD, is expected to record a scorching revenue CAGR of 26.3% (in USD) over FY2011–13E, outperforming tier-I IT companies’ growth. Also, on the back of adequate margin levers, the tailwinds mentioned above are expected to overplay the headwinds such as 1) rupee appreciation and 2) competitive wage hikes in the medium term and help the margins to rebound to 18.4% and 19.5% in FY2012 and FY2013, respectively. At the CMP of `373, the stock is trading at 9.7x FY2013E EPS of `38.5. We value the stock at 11x FY2013 EPS, i.e. 45% discount to Infosys, and recommend an Accumulate rating on the stock with a target price of `424. Exhibit 16: Key assumptions FY2012 FY2013 Revenue growth – USD terms (%) 30.1 22.7 USD-INR rate 44.5 44.0 Revenue growth – INR terms (%) 26.8 21.4 EBITDA margin (%) 18.4 19.5 Tax rate (%) 31.0 31.0 EPS growth (%) (2.0) 12.7 Source: Company, Angel Research Exhibit 17: One-year forward PE(x) chart 700 600 500 (` ) 400 300 200 Dec-10 Apr-10 Jul-10 Aug-10 Apr-11 Jul-11 Mar-11 Oct-10 Sep-10 Nov-10 Feb-11 May-10 May-11 Jun-10 Jun-11 Jan-11 Price 16 14 12 10 8 Source: Company, Angel ResearchJuly 18, 2011 9
    • Persistent | 1QFY2012 Result UpdateExhibit 18: Recommendation summaryCompany Reco CMP Tgt. price Upside FY2013E FY2013E FY2011-13E FY2013E FY2013E (`) (`) (%) P/BV (x) P/E (x) EPS CAGR (%) RoCE (%) RoE (%)3iInfotech Neutral 44 - - 0.6 3.8 (4.3) 12.0 15.1Educomp Buy 387 522 34.8 1.3 7.5 17.7 16.4 17.0Everonn Accumulate 539 602 11.7 2.6 12.8 27.7 15.5 16.7HCL Tech Buy 504 591 17.3 3.2 11.9 30.8 18.9 26.9Infosys Buy 2,714 3,200 17.9 3.9 17.0 15.7 24.7 22.7Infotech Enterprises Neutral 138 - - 1.1 8.6 13.0 15.0 13.2KPIT Cummins Accumulate 182 208 14.3 1.7 10.8 21.9 21.8 17.7Mphasis Accumulate 436 499 14.4 1.6 9.8 9.2 16.8 16.8NIIT Buy 55 68 24.3 1.3 7.9 10.9 12.4 16.6Persistent Accumulate 373 424 13.8 1.5 9.7 5.1 16.6 15.4TCS Buy 1,125 1,368 21.6 5.7 18.1 18.4 30.2 31.3Tech Mahindra Accumulate 741 790 6.6 2.1 13.1 6.8 14.9 15.6Wipro Buy 413 483 17.0 3.1 14.5 14.5 16.3 21.5Source: Company, Angel ResearchJuly 18, 2011 10
    • Persistent | 1QFY2012 Result Update Profit and loss statement (Indian GAAP, Consolidated) Y/E March (` cr) FY2010 FY2011 FY2012E FY2013E Net sales 601 776 984 1,195 Direct costs 337 472 626 759 % of net sales 56.1 60.9 63.6 63.5 Gross profit 264 304 358 436 % of net sales 43.9 39.1 36.4 36.5 S&M expenses 46 62 78 95 % of net sales 7.7 8.0 8.0 8.0 G&A expenses 71 83 98 108 % of net sales 11.9 10.8 10.0 9.0 EBITDA 146 158 181 233 % of net sales 24.3 20.4 18.4 19.5 Depreciation 34 42 54 66 EBIT 113 116 127 168 Other income 8 17 45 42 Forex gain/(loss) 3 17 26 14 Profit before tax 124 150 198 224 Provision for tax 9 11 62 69 % of PBT 7.3 7.1 31.0 31.0 PAT 115 140 137 154 Extraordinary expenses - - - - Final PAT 115 140 137 154 EPS (`) 32.1 34.9 34.2 38.5July 18, 2011 11
    • Persistent | 1QFY2012 Result Update Balance sheet (Indian GAAP, Consolidated) Y/E March (` cr) FY2010 FY2011 FY2012E FY2013E Liabilities Share capital 40 40 40 40 ESOP outstanding 3 3 4 4 Reserves and surplus 580 696 816 954 Hedge reserves 16 8 7 7 Total shareholders funds 639 747 867 1,005 Deferred payment liability 5 3 3 3 Total liabilities 644 750 870 1,008 Assets Gross block - fixed assets 371 454 654 804 Accumulated depreciation 188 228 282 348 Net block 183 226 372 456 Capital work-in-progress 48 60 67 59 Total fixed assets 232 287 439 515 Investments 156 250 250 250 Deferred tax assets, net 1 6 6 - Current assets Sundry debtors 136 158 183 223 Cash and bank balance 192 100 75 128 Other current assets 34 23 25 30 Loans and advances 72 87 110 131 Less: - Current liab. and provisions Current liabilities 148 121 172 208 Provisions 32 40 47 62 Net current assets 255 207 174 242 Total assets 644 750 870 1,008July 18, 2011 12
    • Persistent | 1QFY2012 Result Update Cash flow statement (Indian GAAP, Consolidated) Y/E March (` cr) FY2010 FY2011 FY2012E FY2013E Pre tax profit from operations 113 116 127 168 Depreciation 34 42 54 66 Pre tax cash from operations 146 158 181 233 Other income/prior period ad 11 34 71 56 Net cash from operations 158 193 253 289 Tax 9 11 62 69 Cash profits 149 182 191 220 (Inc)/dec in Current assets (81) (25) (51) (65) Current liabilities 88 (19) 59 51 Net trade working capital 7 (44) 8 (14) Cashflow from operating activities 156 138 199 206 (Inc)/dec in fixed assets (48) (97) (207) (142) (Inc)/dec in investments (68) (94) 0 - (Inc)/dec in deferred tax assets 1 (5) (0) 6 Inc/(dec) in deferred payment liab. 5 (2) (0) - Cashflow from investing activities (110) (198) (207) (136) Inc/(dec) in debt - - - - Inc/(dec) in equity/premium 132 (6) (1) - Dividends (2) (26) (16) (16) Cashflow from financing activities 129 (32) (17) (16) Cash generated/(utilised) 175 (92) (25) 54 Cash at start of the year 17 192 100 75 Cash at end of the year 192 100 75 128July 18, 2011 13
    • Persistent | 1QFY2012 Result Update Key ratios Y/E March FY2010 FY2011 FY2012E FY2013E Valuation ratio (x) P/E (on FDEPS) 11.6 10.7 10.9 9.7 P/CEPS 9.0 8.2 7.8 6.8 P/BVPS 2.1 2.0 1.7 1.5 Dividend yield (%) 0.1 1.5 0.9 0.9 EV/Sales 1.9 1.5 1.2 0.9 EV/EBITDA 7.8 7.2 6.4 4.8 EV/Total assets 1.8 1.5 1.3 1.1 Per share data (`) EPS 32.1 34.9 34.2 38.5 Cash EPS 41.4 45.5 47.8 55.0 Dividend 0.6 5.5 3.5 3.5 Book value 178.1 186.8 216.7 251.1 Dupont analysis Tax retention ratio (PAT/PBT) 0.9 0.9 0.7 0.7 Cost of debt (PBT/EBIT) 1.1 1.3 1.6 1.3 EBIT margin (EBIT/Sales) 0.2 0.1 0.1 0.1 Asset turnover ratio (Sales/Assets) 0.9 1.0 1.1 1.2 Leverage ratio (Assets/Equity) 1.0 1.0 1.0 1.0 Operating ROE 18.0 18.7 15.8 15.4 Return ratios (%) RoCE (pre-tax) 17.5 15.5 14.6 16.6 Angel RoIC 45.7 34.1 26.6 29.4 RoE 18.0 18.7 15.8 15.4 Turnover ratios (x) Asset turnover (fixed assets) 2.7 3.0 2.7 2.5 Receivables days 73 69 68 68 Payable days 120 104 100 100July 18, 2011 14
    • Persistent | 1QFY2012 Result Update Research Team Tel: 022 - 3935 7800 E-mail: research@angelbroking.com Website: www.angelbroking.com DISCLAIMER This document is solely for the personal information of the recipient, and must not be singularly used as the basis of any investment decision. Nothing in this document should be construed as investment or financial advice. Each recipient of this document should make such investigations as they deem necessary to arrive at an independent evaluation of an investment in the securities of the companies referred to in this document (including the merits and risks involved), and should consult their own advisors to determine the merits and risks of such an investment. Angel Broking Limited, its affiliates, directors, its proprietary trading and investment businesses may, from time to time, make investment decisions that are inconsistent with or contradictory to the recommendations expressed herein. The views contained in this document are those of the analyst, and the company may or may not subscribe to all the views expressed within. Reports based on technical and derivative analysis center on studying charts of a stocks price movement, outstanding positions and trading volume, as opposed to focusing on a companys fundamentals and, as such, may not match with a report on a companys fundamentals. The information in this document has been printed on the basis of publicly available information, internal data and other reliable sources believed to be true, but we do not represent that it is accurate or complete and it should not be relied on as such, as this document is for general guidance only. Angel Broking Limited or any of its affiliates/ group companies shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. Angel Broking Limited has not independently verified all the information contained within this document. Accordingly, we cannot testify, nor make any representation or warranty, express or implied, to the accuracy, contents or data contained within this document. While Angel Broking Limited endeavours to update on a reasonable basis the information discussed in this material, there may be regulatory, compliance, or other reasons that prevent us from doing so. This document is being supplied to you solely for your information, and its contents, information or data may not be reproduced, redistributed or passed on, directly or indirectly. Angel Broking Limited and its affiliates may seek to provide or have engaged in providing corporate finance, investment banking or other advisory services in a merger or specific transaction to the companies referred to in this report, as on the date of this report or in the past. Neither Angel Broking Limited, nor its directors, employees or affiliates shall be liable for any loss or damage that may arise from or in connection with the use of this information. Note: Please refer to the important `Stock Holding Disclosure report on the Angel website (Research Section). Also, please refer to the latest update on respective stocks for the disclosure status in respect of those stocks. Angel Broking Limited and its affiliates may have investment positions in the stocks recommended in this report. Disclosure of Interest Statement Persistent 1. Analyst ownership of the stock No 2. Angel and its Group companies ownership of the stock No 3. Angel and its Group companies Directors ownership of the stock No 4. Broking relationship with company covered No Note: We have not considered any Exposure below `1 lakh for Angel, its Group companies and Directors Ratings (Returns): Buy (> 15%) Accumulate (5% to 15%) Neutral (-5 to 5%) Reduce (-5% to 15%) Sell (< -15%)July 18, 2011 15