Quick Take:

      Mphasis October Results:Another stellar operating performance  

      'Best demand' story thesis continues to get vindicated

Mphasis reported results for 7 months ending Oct 31'08 late in the evening today as announced earlier in order to align it's accounting year to HP (HP follows a Nov-Oct financial year). Mphasis reported revenues of Rs 3282 mn,  with operating margins at 26.5%, highest in the company's reporting history for Oct'08 . Net profits for October'08 came in at Rs 754 mn helped by translation gains as well as tax credits (effective tax rate for the month at <1%).If financials were to be quadrupled to make it comparable, revenues are up 17.8% sequentially while operating profits and net profits are up by ~47% and ~60%QoQ respectively. We note that Mphasis has reported earnings of Rs 14.06 for 7 months ended Oct'08 ( as compared to our April'08-March'09 financial year earnings estimates of Rs 21.8). The company had a marginal decline in headcount by ~45  to 28795 during the month V/s Q2FY09 end HC while maintained similar utilization rates to Sept'08 quarter (though note onsite apps utilization up by 200 bps to 87%)  

Decent client addition through EDS, Top client contribution inches by ~200 bps

Mphasis has reported an addition of 7 new clients during Oct'08 month with 6 clients coming in through the EDS channel. We note further that the top client accounted for ~13% of revenues during the month of October'08 V/s ~11% during September'08 quarter. Further we wish to highlight that revenues from BFSI are up by ~21% QoQ while revenues from applications, BPO and ITO increased by ~18%, 10% and 26% sequentially respectively (if they were to be be quadrupled)

In Rs mn	Q3FY09**	Q1FY09	QoQ(%)	Q3FY08	YoY (%)
Net sales	9,847	8,361	17.8%	6,323	55.7%
Total Income	9,847	8,361		6,323
Operating expenses	7,242	6,592		5,218
EBITDA	2,606	1,768	47.3%	1,104	135.9%
Margins (%)	26.5	21.2		17.5
Depreciation	442	446		374
EBIT	2,163	1,323	63.6%	730	196.4%
Margins (%)	22.0	15.8		11.5
Interest Paid	0	0		0
Other income	110	164		(28)
Pre-tax profit	2,273	1,487		702
Tax provided	11	77		40
Profit after tax	2,262	1,410		663
Emkay Net profit	2,262	1,410	60.4%	663	241.3%
EPS, Rs	10.8	6.7		3.2

Source: Company, Emkay Research

**-October'08 financials have been quadrupled for the sake of comparison

 

We have a BUY rating on the stock with a price target of Rs 240.

 

Tata Steel (Consolidated) 2QFY09 result estimates

Tata Steel will be reporting consolidated 2QFY09 results today. We expect company to report net sales of Rs359.3bn (yoy up 10.8%), EBITDA of Rs41.3bn (yoy down 12.6%) and adjusted PAT of Rs18.4bn (yoy up 26.2%). We expect Tata Steel to report adjusted FDEPS of Rs21.13. Key things to watch out are outlook on volume growth and capex plans.

n        Dealer Comments

The markets opened the session on a marginal positive note with 70 odd point's upward gap on the back of mixed cues from the global markets and further dip in the crude oil price at $51 levels. With just two days to expiry of the November derivatives contract markets were trading in a choppy mood and roll over to next month series was showing weakness. The markets staged a solid pull back rally after China's central bank announced series of steep rate cuts thereby raising hopes that on the domestic front RBI would also go for similar rate cuts which is being anticipated since last couple of weeks. Even statement from the Oil Ministry regarding fuel price revision will be considered in due course keeping in mind dipping crude prices raised the market sentiments further. A good amount of short covering was seen in Nifty futures after these events in last hour of trade. The overall traded volumes were slightly higher compared to earlier day by almost 8% and were at Rs 609 bn. Delivery-based volumes were at 33.1% the total turnover. Among the institutional activities FII's were net buyers to the tune of Rs 0.02 bn while Domestic Funds were net buyers to the tune of Rs 1.18 bn respectively in the cash segment on 25th November 2008. While on 26th November 2008 FII's sold shares worth Rs. 4.17 bn in cash segment (provisional) and in the F&O segment bought Futures and Options worth Rs. 9.45 bn whereas Domestic Funds bought shares worth Rs. 3.62 bn (provisional).