Rolta India Ltd.
CMP Rs 178.35
Target Price Rs 255.00
Company Snapshot
Rolta is a market leader in providing specialized technology solutions and services for the Geospatial, Defense and Homeland Security and Engineering sectors. Rolta is a global company and offers a full complement of solutions to companies around the world. Rolta also offers a focused set of services in eSecurity, Enterprise IT Management, ERP Consulting and Deployment as well as a wide range of Database and Business Intelligence solutions in the area of Enterprise IT.
Rolta India Ltd has come up with sustained results for Q1FY10. The total revenue of the company has gone up from Rs.3211.07 million in Q1FY09 to Rs.3326.97 million in Q1FY10 showing an increase of 3.61%. The operating profits almost remained flat at Rs.1124.73 million in Q1FY10 as compared to Rs.1121.87 million in Q1FY09. The net profit of the company increased from Rs.508.27 million in Q1FY09 to a profit of Rs.762.28 million in Q1FY10 showing a rise of 49.98%. Operating profit margin remained at 33.81% down from 34.94% in the same quarter last year and the Net Profit Margin jumped from 15.83% last year to 22.91% in Q1FY10. The EPS of the company stood at Rs.4.73 in Q1FY10 which was Rs.3.16 in Q1FY09.
Business Details
Rolta is an Indian multinational organization that has executed in over 40 countries. In the Geospatial business, Rolta enjoys a market share of over 70% in India for segments such as infrastructure, telecom, electric, airports, urban development, town planning and environmental protection. Rolta now offers its Geospatial offerings to large markets in the developed and developing countries with its innovative solutions after the launch of high-end photogrammetry and comprehensive imaging technologies.
Indian Armed Forces have adopted Rolta’s Geospatial based operations and intelligence solutions resulting in a dominant market share. These solutions cover a range of domains such as Data Security and Service Management, Database Foundation, Enterprise Applications and Business Intelligence. Rolta has made a few strategic acquisitions. They acquired Orion, based in Canada, which provides spatial integration consulting, software and implementation services for global customers. They also acquired WhittmanHart Consulting, based in USA, which provides technology consulting and solutions for Business Intelligence and TUSC which provides integrated functional and technical solutions to customers.
Rolta has two joint ventures. Shaw Rolta Ltd with the Shaw Growp Inc., USA, which provides comprehensive engineering, procurement and construction management services to the power, oil, gas and petrochemical sectors. Rolta Thales Ltd with Thales, France offers leading-edge information systems to the defense, homeland security and intelligence sectors. Sectoral Outlook
While the global IT industry had a difficult year, the Indian IT industry has grown in strength and value and serves a significant portion of the global information technology outsourcing needs by leveraging its large, highly qualified and growing talent base. According to NASSCOM report,
IT Services alone constituted 57% of Indian IT exports in FY2009 and accounted for about $26.9 billion in value. The sector revenues as a proportion of national GDP have grown from 1.2% in FY 1998 to an estimated 5.8% in FY2009. India’s IT growth in the world is primarily dominated by IT software and services such as Custom Application Development Maintenance (CADM), System Integration, IT consulting, Application Management, Infrastructure Management Services, Software testing, Service-oriented architecture and Web services. Indian IT is also playing a key role in global technology IP creation. As per NASSCOM, exports from high-value-added services such as engineering, R&D and offshore product development grew by 15% to reach $7.3 billion in FY2009. The government expects the exports turnover to touch US$80 billion by 2011 growing at an annual rate of 30% per annum.
Investment Rationale
The company saw a lot of orders flowing in the month of June. The company has approximately Rs.1600 crore of firm orders in hand and Rs.5000 crore in the pipeline. The company has taken very strategic orders in the newer solutions that they have booked in the GeoSPatial Fusion, Rolta one view which has been introduced in the engineering space and in Rolta SOA which has been introduced in the IT space. A very large order in GeoSpatial Fusion is MIDE (Ministre de l’Agence de Developpement economique), which is the Canadian agency for economic development. Another large order for GeoSpatial Fusion is from the Road Transport Authority in Dubai. In India, their engineering services are given to the Department of space and ISRO for the design of rocket engines and to KBR in the last quarter. With these various orders in hand, the company is in a good position for the current year.
The management is positive on the company’s future plans. They have given a positive guidance to grow by 10-15% in the topline as well as in the bottomline during the current fiscal year. The company has been able to transform in the last one year by adding a lot of solutions, IPO, making a lot of acquisitions and by being able to transform the business. All this together makes the company very confident in moving forward. Rolta India Ltd reported good results in FY09. The net sales of the company went up from Rs.10722.14 million in FY08 to Rs.13728.13 million in FY09 showing a growth of 28.04%. This led to the increase in the operating profits of the company from Rs.3897.396 million last year to Rs.4635.27 million this year depicting a growth of 18.93%. The operating profit margin stood at 33.76% this fiscal dropping from 36.35% in FY08. The profit before taxes increased by 24.14% to Rs.3332.75 million in FY09 from Rs.2684.60 million in FY08. The net profit of the company stood at Rs.2938.28 million increasing at the rate of 27.42% from previous year’s Rs.2305.94 million. The Net Profit Margin of the company remained flat at 21.40%. The EPS increased from Rs.14.33 to Rs.18.25 in FY09.
Valuation
The company’s future prospects are becoming brighter with the various orders in hand and improving yearly and quarterly performance. Presently, the company is running at a P/B multiple of 2.02x to it’s FY09 book value of Rs.88.42 while the P/E multiple of the company is running at 9.77x to its FY09 EPS of Rs.18.25. However, the industry is running at a P/E multiple of 19.30x which leaves the stock with a significant upside potential. Hence, we recommend BUY on the stock with a medium term price target of Rs.255.00.
Source: Internet (Hem Securities)
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