Subex’s results for Q1FY09 were marginally higher than estimates. Product revenues grew by 35% on a q-o-q basis on the back of higher license revenues, which formed about 62% of the product revenues. The growth on a y-o-y basis was lower at about 5%.
In terms of order bookings and pipeline, the company had an order backlog of about $75 million (including annuity revenues) as at Q1FY09 end ($85 million as at Q3FY08 end).
The order intake was at about $15 million, which was the lowest in past three quarters.
We remain cautious on the sector, with several Indian vendors reporting disappointing numbers in this vertical.
Also, the company had a consolidated pipeline (including Syndesis) of $352 million ($347 million). Subex normally enjoys a success rate of 40% but the expected success rate of this order pipeline is about 31%.
We expect the company to report revenues of Rs6.05 billion in FY09. Product revenues are expected to increase to Rs4.81 billion in FY09.
EBIDTA margins are expected to improve over Q1FY09 on the back of higher product revenues and cost control initiatives. After considering no tax (because of carried forward losses of FY08) in FY09, we arrive at a PAT of Rs336 million and an EPS of Rs10 for FY09 (Rs16 earlier). We maintain REDUCE on this stock.