Satyam to deliver significant outperformance on its FY2008 revenue (40% versus its guidance of 35.5% for FY2008) and EPS guidance (Rs25.3 versus guidance of Rs24.5). Expect Satyam to significantly outperform its Sep ’07 quarter guidance of 6% qoq revenue growth. Satyam will deliver the highest revenue growth rate for Satyam in Tier 1 coverage list.
Satyam’s SAP practice has been a major contributor to its strong growth (CQGR of 12% over the past four quarters in the package implementation area—SAP has grown faster than the overall PI business). Satyam’s Engineering Services practice has been among the fastest growing service lines for the company (a CQGR of 14.3% over the past four quarters vs. company average of 9.3%) over the past 12 months.
Kotak values Satyam at Rs570 on absolute DCF valuation methodology. This translates into 22.5XFY2008E and 18.1XFY2009E earnings. Satyam is currently trading at 16.9XFY2008E and 13.6XFY2009E EPS, a 25% discount to Infosys and 15% lower than its historical average.
In a separate development, Sr. Fund Manager, Prashant Jain has totally sold TCS and Wipro in HDFC Equity Fund.