Buy Patni Computers – 27th October 2009

Buy Patni Computers above Rs.464, CMP : Rs.463.60, Short Term Target : Rs.485-489, Stop Loss : Rs.451
Long Term Target : Rs.525-540 (6 Months – 1 year Time Frame)  - 27th October 2009

Patni Computer Systems Ltd. (Patni) (BSE: PATNI COMPUT, NSE: PATNI, NYSE: PTI) is one of the leading global providers of Information Technology services and business solutions. Over 14,500 professionals service clients across diverse industries, from 27 sales offices across the Americas, Europe and Asia-Pacific, and 22 Global Delivery Centers in strategic locations across the world. We have serviced more than 400 FORTUNE 1000 companies, for over two decades.

Patni delivers high quality, reliable and cost-effective IT services to customers globally. We provide world-class technology services by constantly exploring and implementing innovative solutions that drive long-term value to their customers.

As industry leaders, they introduced offshore development centers, pioneered “follow the sun” development and support frameworks, ensuring compressed delivery timeframes.

Today, Their solutions provide strategic advantage to several most-admired organizations in the world. They have long-standing and vibrant partnerships with over 300 companies across the globe.

Financial Background :
For the financial year ending 31st Dec 2008 the revenue of the company on a consolidated basis went up more than 13.54% (YoY) to Rs 3247.61 crore. The cash & bank balance shot up 128% (YoY) to 293.18 crore. The operating profit went up 4.2% (YoY) to Rs 550.88 crore. Interest expenses went down from Rs 14.72 crore to 7.9 crore and the depreciation went up from Rs 98.47 crore to Rs 114.15 crore. As a result the net profit went down 9.43% (YoY) to Rs 438.01 crore.

For the second quarter of FY09 revenue increased 0.13% (QoQ) to 784.18 crore, which was in line with management’s guidance. The EBIDTA went up 72.41% (QoQ) to Rs 219.74 crore, which is showing good growth. Interest expenses went down 50% (QoQ) from to 1.97 crore and the depreciation went up 87% (QoQ) to Rs 54.08 crore. As a result, the net profit after tax shot up 78% (QoQ) to Rs 135.97 crore. The main reasons for growth are that some sectors like insurance and financial services are giving good business to IT industry and US economy is also stabilizing, this means that Patni’s revenue from US has stabilized.

Our Recommendation :
Patni Computers is an excellent pick in the MID cap IT Segment,The profit is bound to improve with improving economic news from the U.S. We recommend the stock with a 6 months to 1 year time frame value of Rs 525 – 540.

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