Spanco

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Apr 9, 2010, 1:45:57 PM4/9/10

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Spanco
BSE: 508976

Target for 2010
Tot Revenue Rs 11950 million (up 79.7%)
Op Profit Rs 1560 million (97.6%)
Net Profit Rs 601 million (300%)
NPM 5.05%

Projected EPS 21.39 Book Value 133
at CMP 91.25 M cap is 256 Cr
PE 4.3x (eps of 2010)

the stock trades at P/BV of 0.686x nd Mc/Sal 0.21x
as against peer PE 18.9x P/BV 4x of nd Mc/Sal 3x

Expecting a PE 14.9x P/BV 2.4 x of nd Mc/Sal 0.78x
Expected dividend payout 23.8% of EPS and Bonus of 5:1
hence target 318 in nine months .

India-centric IT vendors seem to be finally reaping the benefits of
their strategy to focus on domestic opportunities, considering the
buoyancy in
local IT spends. In contrast, IT players, who for long targeted
principally overseas markets, are still awaiting a revival in global
demand.

The Indian market for IT solutions has continued to expand in FY10 as
a slump in global IT spends. Industry body Nasscom has estimated a
growth of 12% in the local market for FY10. On the other hand, global
IT demand fell 4.6% in 2009, according to technology research firm
Gartner. The trend is also visible in the performance of IT firms in
the first nine months of FY10. Most IT players that earn more than
half of their revenues from the domestic market have staged an
impressive performance.

Some like systems integrator Allied Digital, OnMobile that offers
software platforms to mobile value services, education software
players Educomp Solutions and Core Projects, and Spanco that provides
IT infrastructure and BPO services to the telecom sector have reported
double-digit growth in revenues and operating profits during the three
quarters ended December 2009 when reckoned year-on-year.

The India growth angle emerges more vividly in the case of Wipro.
While its IT export revenue grew 5% during the nine months, products
revenue that mainly includes its domestic activities rose by 14%.
Operating profit growth was 18% and 36% in two segments,
respectively.

However, not all IT companies with a local focus have done well. HCL
Infosystems and Rolta, for instance, failed to report significant
growth in sales and operating profits during the first nine months of
FY10. This draws attention to the fact that local companies with a
focus on domestic telecom, education and financial sectors did well
given the buoyancy in these sectors.

Going ahead, these sectors could benefit from various government
initiatives such as education for all, financial inclusion, mobile
banking and the launch of 3G telecom services.

Nasscom expects domestic IT revenue to grow at a faster pace of 19-21%
in FY 2011. This also means that local IT players are likely to
maintain their fast pace of growth. Further, Nasscom anticipates a
recovery in global demand as well, which may see a growth of 13-15% in
IT exports.

It is, however, too early to hope for a recovery in IT exports since
experts point to the possibility of another deeper recession in the US
and European economies. ...