Topic: from 180 to Target Price Rs 255.00

Topic: from 180 to Target Price Rs 255.00

Rolta India Ltd.
Target Price Rs 255.00
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.

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.
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.

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.

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