Edelweiss - TCS - Q4FY07 result highlights - positive results

[Deadpresident]

Tata Consultancy Services (TCS IN, CMP 1, 280 , maintain B UY)

 

Q 4FY07 Result Highlights

 

·          TCS announced its Q 4 FY07 results late evening. Revenues were ahead of expectations while the net profits were inline with expectations. Revenues were reported at INR 51.5 bn up 5.9 % QoQ and 37.9 % YoY and net profits stood at INR 11.7 bn, up 6.2% QoQ and 44.9% YoY.  

 

·          Gross margins were up 20 bps QoQ and 40 bps YoY. The increase in the margin is attributed to the improvement in the utlisation level and improved realisations.

 

·          EBITDA for the quarter stood at INR 1 4 . 6 bn up 5 .9% QoQ and 43 .7 % YoY. EBITDA margins remained stable at 28.3% . QoQ but were up 110 bps Yo Y.

 

·          The employee head count increase continued to remain strong. This quarter the company added a gross of 8 ,613 employees and a net of 5,991 employees. The total headcount for the company now stands at 8 9, 491 employees.

 

·          Attrition for the quarter stood at 11.3% up from 10.8% in the previous quarter. However the attrition in IT-services remained low at 10.6% which is the best in the sector. BPO attrition stood at 20.2%.

 

·          Utilisation rate (excl. trainees) improved during the quarter from 78.2% in Q3FY07 to 79.6% in the current quarter. I ncl. trainees the utilisation for the company stood at 7 4.7% during the quarter compared to 75. 0 % in Q 3 FY07.

 

·          During the quarter the company added 43 new clients and the active client count now stands at 780 compared to 754 clients in the previous quarter . TCS has 297 customers contributing revenues of USD 1 mn plus as against 288 in Q3FY07 and 256 in Q4FY06. Notable the clients with revenue contribution of over USD 50 mn have grown from 9 in Q4FY06 to 14 in Q4FY07 which is particularly impressive.  

 

·          Offshore revenue contribution (41.3%) remained mainly in line with the previous quarter (41.6%).

 

 

Highlights of FY07

 

·          TCS closed FY07 with revenues of USD 4.3 bn and net income of USD 950 mn, a growth of 41% and 43% respectively in USD terms

 

·          North American revenues crossed USD 2 bn and Europe crossed USD 1 bn revenue mark

 

·          The company closed 12 deals of value USD 50 and above, during the year

 

·          Customer addition for the year stood at 218, headcount increased by 34.6% to reach 89,500

 

 

Outlook for FY08 and valuations

 

·          TCS is experiencing strong traction/ ramp up from its existing customers. The newer services are achieving meaningful size, contributing higher share to profitability. We note the comments of the management relating to the pricing, which hinted that the pricing is very encouraging and the deal pipeline is also fairly robust. The company has mentioned that it is currently pursuing 10 deals that are upwards of USD 50 mn in size and some of them are more than USD 100 mn in size.

 

·          We have collated our numbers based on the discussion during the conference call. Our revised EPS number for FY08E and FY09E stand at INR 55.4 and INR 68.9 respectively (CAGR of 27.7% through FY07-09E). At current market price of INR 1,280 the stock trades at a P/E of 23.1x and 18.6x and EV/EBITDA 17.8x and 13.7x on our FY08E and FY09E earnings respectively. We maintain our 'BUY' recommendation.

 

 

 

 

 

--
The best resource for Indian Stock Reports >> http://DEADPRESIDENT.BLOGSPOT.COM