Hold Patni Computers Ltd - PINC Result Review

Patni missed the revenue guidance (both lower and upper) and achieved USD167.6mn (2.8%QoQ decline). For Q3CY10, it has guided for 5-6%QoQ revenue growth and ~16%QoQ decline in PAT (excl forex gain) due to expectation of lower treasury income (~USD4mn lower than Q2CY10).

* Revenue decline due to supply side concerns
* Europe declined 14.5%QoQ but looking better now
* BPO and IMS grew sharply amidst decline of others
* Attrition shot up to 21.5%, healthy net addition of 934
* Margin headwinds - S&M to increase, transition costs

Outlook – Revenue growth had been a regular concern and in the last two quarters it has underperformed compared to peers. For Q3, excl. the one-time component of CHCS revenue, the organic revenue growth guidance is also muted. High cash & equivalent (Rs21,655mn) support valuation and also throw opportunities for inorganic growth.

We maintain 'HOLD' rating with a target price of Rs500 based on 12x CY11E earnings.

Source : Equity Bulls

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