Allied Digital Services (ADSL) – Order pipeline healthy

Q3FY10 results review and earnings revision - ICICI Securities

ADSL's revenues grew 7.4% QoQ to Rs1.79bn (I-Sec: Rs1.76bn), with solutions and services posting 7.9% and 7.1% QoQ revenue growth respectively. Standalone services revenues grew a healthy 17.1% QoQ (55% YoY), while EnPointe Global Services' (EGS) dollar-denominated revenue growth was muted at 2.3% QoQ to US$11mn. Consolidated EBITDA margin declined 40bps QoQ to 19.9% (I-Sec: 20.8%) due to higher growth in solutions and 70bps decline in subsidiaries' EBITDA margin to 4%. PAT rose 8.3% QoQ to Rs272mn (I-Sec: Rs273mn). ADSL is witnessing increased traction in the US with few large deal wins, including some US state government projects. Besides, India-based services revenue CQGR grew a healthy 11.7% QoQ over the past four quarters and the growth momentum is expected to be maintained. We expect revenue and PAT CAGR of 18% and 21% over FY10E-12E.The stock trades at FY11E P/E of 8.3x and EV/E of 5.1x. Maintain BUY with target price of Rs265.

Source : Equity Bulls

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