ECLERX SERVICES
CMP: Rs 733
Fair Value: Rs 760
eClerx Services (eClerx) Q2FY12 results were better than Crisil Research’s expectations. While the 8.8 per cent q-o-q revenue growth was in line, net profit margin was higher than expected. Steady mining of the top five clients and strong growth across other clients resulted in robust top line growth during the quarter. Ebitda margin declined slightly by 32 bps q-o-q to 38.9 per cent due to the expected acceleration in sales and marketing effort to clients other than the top 5. Employee cost as a percentage of sales declined 106 bps due to increase in staff utilisation to 71 per cent from 67 per cent in Q1FY12. However, the reduction in employee cost was offset by higher general and administrative costs. Net profit margin was higher than expected due to forex gains. We continue to use the price to earnings ratio cash flow method to value eClerx and following a revision in our exchange rate forecast we revise our fair value upwards at Rs 760.
Crisil Research
STERLITE INDUSTRIES
CMP: Rs 121
Target price: NA
Sterlite Industries’ 2QFY12 results were marginally below estimates due to dismal performance in the aluminium segment. It reported a 5 per cent lower EBITDA compared to our estimates. Operational results across verticals were stable, except in aluminium, due to a steep jump in coal prices. Net profit remained 35 per cent below estimates due to Rs 404 crore forex mark-to-market loss. The company upgraded its dividend policy from progressive to percentage of profit, but in view of low interim dividend payout (around 13 per cent), overall dividend payout may not improve in FY12. The management has indicated conversion of a part of Vedanta Aluminium’s inter-corporate deposit into equity.
Nirmal Bang