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Satyam Strong Amongst Peers – CS

January 23, 2008

Satyam Computers continued with its winning momentum in Q3FY08 and also acquired Business / management consultancy firm – Bridge Consulting. Given the forecasts of a significant slowdown in the US economy in 2008, it appears that the market is worried about the growth of Indian IT companies. This could keep the near-term share performance in check. Companies themselves lack visibility, and hence it remains difficult to forecast FY3/09 numbers.

With 9.4% QoQ volume growth, Satyam easily dwarfed the growths exhibited by Infosys and TCS. Satyam has managed to buck the trend of rising attrition – it has reduced attrition rates by 450 bp YoY.Management increased its full-year EBITDA margin drop guidance to 175-200 bp, from 175 bp earlier.

At 13x 12-month forward P/E (consensus based), Satyam is trading below historical average levels and is thus inexpensive. Satyam Computers is expected to report an EPS of Rs 25.29 for FY08 and Rs 30.41 for FY09. Credit Suisse maintains an OUTPERFORM rating with a price target of Rs 500.

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