Satyam's bottomline expected to grow by 100 per cent

NetScribes/Ganesh Ramamoorthy

Satyam Computer is expected to post a 70-80 per cent growth in its topline and over 100 per cent growth in its bottomline for the quarter ended September 30, 2000, as against the same period last fiscal. However, these growth rates are expected to remain flat in comparison to the quarter ended June 30, 2000.

The Satyam counter witnessed hectic activity registering huge volumes on both the bourses, on October 4. On the Bombay Stock Exchange, about 8.6 million shares were traded, and, on the National Stock Exchange 10.3 million shares were traded. The scrip, though, moved in a very narrow range. On the BSE, the scrip gained by Rs 3.80 to close at Rs 496.85, up from the previous close of Rs 493.05. On the NSE, the scrip closed at Rs 497 (a gain of Rs 11.85), up from its previous close of Rs 485.15.

Analysts attributed the increased trading activity in the counter to the forthcoming quarterly results announcement by the company. "The company is fundamentally strong, and at the current market price, is very attractively valued," said an analyst with First Global Securities.

"We expect Satyam to post a total revenue of Rs 2.64 billion and a net profit of Rs 738 million for this quarter," he said. He expected the Internet and e-commerce-related business to contribute over 35 per cent to the total revenues during the quarter.

For the quarter ending June 30, 2000, Satyam reported an increase of 74.8 per cent in sales to Rs 2.3 billion and a 94.9 per cent rise in net profit to Rs 503.6 million as compared to the same quarter last year. "In this quarter, the figures will remain somewhat similar mainly because there aren't any new projects that it has taken up during the quarter. Most of the revenues will come from its ongoing projects. Therefore, the growth in the topline and the bottomline in comparison to the quarter ending June 30, 2000, will be very flat," the analyst said.

However, with Satyam retiring its debts from the proceeds of the sale of a 1.3 per cent stake in Satyam Infoway (for a net consideration of Rs 1.7 billion), analysts expect a saving of Rs 120 million in interest expenses during the current quarter. "This will have a direct impact on the bottomline and so we have revised our earnings estimates by 3.8 per cent," said an analyst with Smifs Securities.

While the scrip has declined by more than 20 per cent in the last fortnight, analysts expected the stock to firm up at the current levels during the next quarter. "In about six months, the scrip should appreciate by at least 50 per cent," the analyst said. He added that at the current levels the scrip was undervalued by about 10-15 per cent. According to Barra consensus estimates, the stock is currently trading at a price earnings multiple of 54.8 to its annualised fiscal 2001 earnings.

"In our opinion, the current valuations of Satyam are extremely attractive and we maintain our 'buy' recommendation. Also, these valuations do not capture the hidden value in Satyam's subsidiaries, which, if considered, makes valuations even more attractive," said the analyst with Smifs Securities.

Money

Market Impact

Tell us what you think of this report