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Saturday, July 23, 2005

Satyam & Geometric - Sharekhan


Satyam Computer Services  
Cluster: Apple Green
Recommendation: Buy
Price target: Rs 570
Current market price: Rs 533

Numbers ahead of expectations

Result highlights
  • Satyam Computer Services' Q1FY2006 results were better than our expectations.
  • The company's top line surged by 8.5% quarter on quarter (qoq) on the back of a good volume growth of 8.7%.
  • The operating profit grew by 2.5% qoq. 
  • The operating profit margin (OPM) fell by 140 basis points in line with our expectations. The company expects its margins to improve in the coming quarters. 
  • The net profit declined by 3.7% qoq. 
  • The company plans to acquire Singapore-based data warehousing (DW) and business intelligence (BI) solution provider KDP soon. 
  • It has marginally revised upwards its guidance for FY2006. 
  • At the current market price the stock is quoting at 14.9x FY2007E earnings. 
  • We maintain our Buy call on the stock and upgrade it to the Apple Green cluster.


Geometric Software Solutions Company 


Cluster: Emerging Star
Recommendation: Buy
Price target: Rs 630
Current market price: Rs 545

Price target revised upwards

Result highlights
  • Overall Geometric Software's Q1FY2006 numbers are slightly below our expectations.
  • The company's top line fell by 2.6% on a quarter-on-quarter (q-o-q) basis. The top line numbers are marginally below our expectations. 
  • The decline in the top line resulted in a higher-than-expected fall in the operating profit margin (OPM). 
  • The operating profit fell by 36.1% quarter on quarter (qoq). 
  • A higher other income helped the company in controlling the fall in its net profit, which decreased by just 3.7% qoq.
  • At the current market price of Rs545 the stock is quoting at 10.4x FY2007E earnings. 
  • We maintain our Buy call on the stock with a revised price target of Rs630

Riding the Ciprofloxacin wave..


The prices of Ciprofloxacin bulk drug are on a continuous rise on the back of shortage of raw materials. In the domestic market, prices have moved up more than 100% from Rs.900/Kg in January to more than Rs.1950/Kg now. The trend is not expected break for 6-8 months from now.

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