Q1FY09 (November - October fiscal) results were above estimates on higher revenues and margins. Volume growth of about 6% q-o-q in IT services is encouraging in this macro scenario.
This is the third consecutive quarter of 6 - 7% volume growth; HP support is a differentiator, in our view. There have been no client specific issues with the company, as yet. We retain caution in future quarters but expect q-o-q volume growth.
We have made changes to our FY09 estimates. The new estimates are for fiscal November - October. We have now assumed the rupee to appreciate to Rs46 per USD by FY09 end.
Post our earnings revision, we now expect the company to achieve revenues of Rs40.3 billion in FY09. We have assumed margins to be lower due to the expected rupee appreciation and salary increases.
Thus, PAT is expected to reach Rs7.56 billion in FY09. This would translate into an EPS of Rs36 for FY09.
We upgrade the stock to BUY (from Accumulate) with a price target of Rs242 (Rs215 earlier). While strong parentage is a positive, uncertainty over future allocation of business remains a concern for the market.