January 15, 2008
Rating
OP
Price Rs79Target Price Rs92Implied Upside 16.5%Sensex 20,251
(Prices as on January 15, 2008)
Trading Data
Market Cap. (Rs bn) 4.9Shares o/s (m) 61.9Free Float 58.7%Avg. Daily Vol (‘000) 96.6Avg. Daily Value (Rs m) 8.2
Major Shareholders
Promoters 26.7%Foreign 16.9%Domestic Inst. 29.9%Public & Others 26.5%
Stock Performance
(%) 1M 6M 12M
Absolute (6.3) (36.7) (44.3)Relative (7.4) (69.3) (87.6)Price Performance (RIC: GEOM.BO, BB: GEO IN)
60708090100110120130140150
J a n - 0 7 M a r - 0 7 M a y - 0 7 J u l - 0 7 S e p - 0 7 N o v - 0 7 J a n - 0 8
(Rs)
Source: Bloomberg
Geometric Software
Results uninspiring; EBITDAM improved marginally
Results:
Geometric Software reported weak Q3FY08 numbers, withrevenue growing by just 1.2% QoQ to Rs1,240m and net profit decliningby 25% QoQ to Rs68m. However, it did well to expand its EBITDA marginby 120bps to 11.5%. However, due to lower forex income (Rs6m ascompared to Rs39m in Q2FY08) and higher taxation (19.1% of PBT ascompared to 8.9% of PBT in Q2FY08) its net profit margin contracted by190bps to 5.5%. Tax provision was higher due to higher FBT (on accountof more reimbursement to employees) and lower bought/forward lossesof Modern Engineering.
Saving grace:
Geometric won new deals worth US$9m during the quarterand added 17 new clients. Geometric Engineering’s (earlier ModernEngineering) performance improved during the quarter, where it loweredits EBITDA loss to US$97,000 as against US$474,000 loss in Q2FY08.
Valuation:
We expect Geometric to report -2.7%, 11.2% and 30.1% profitgrowth in FY08, FY09 and FY10 respectively. We believe that the nexttwo quarters would be very critical for the company, as some of the newinitiatives taken (like direct approach to customers) would startreflecting in its performance. At the CMP of Rs80, the stock quotes at12.0x FY09E earnings. We maintain Outperformer rating with a targetprice of Rs92 (14x FY09E earnings).
Key financials (Y/e March) FY07 FY08E FY09E FY10E
Revenue (Rs m) 3,831 4,895 6,035 7,620
Growth (%) 71.5 27.8 23.3 26.2
EBITDA (Rs m) 640 511 785 1,029PAT (Rs m) 374 364 405 527EPS (Rs) 6.0 5.9 6.5 8.5
Growth (%) 45.3 (2.7) 11.2 30.1
Net DPS (Rs) 0.8 0.8 1.3 1.5
Source: Company Data; PL Research
Profitability & valuation FY07 FY08E FY09E FY10E
EBITDA margin (%) 16.7 10.4 13.0 13.5RoE (%) 24.0 17.7 17.0 19.0RoCE (%) 19.9 13.9 13.7 15.8
EV / sales (x) 1.4 1.1 1.0 0.8EV / EBITDA (x) 8.7 10.2 7.3 5.7PE (x) 13.0 13.4 12.0 9.2P / BV (x) 2.2 1.9 1.6 1.4
Net dividend yield (%) 1.0 1.0 1.6 1.9
Source: Company Data; PL Research
Apurva Shah Jaspreet ChhabraApurvaShah@PLIndia.com JaspreetChhabra@PLIndia.com+91-22-6632 2214 +91-22-6632 2256
Q 3 F Y 0 8 R e s u l t U p d a t e
Leave a Comment