AnandRathi
Sasken Technologies (Buy)
CMP: ₹588
Target: ₹960
b) Sasken reported 11.5 per cent EBIT margins in Q2, down from 16.4 per cent in Q1. The 540 bps drop q-o-q in utilisation and a slight (68) headcount reduction resulted into costs shrinking just 2.5 per cent q-o-q (on revenue declining 6.7 per cent q-o-q). The company expects headcount to be stable and utilisation to be pulled back in Q3 to deliver better margins. Given the ramp-down ahead, we are building in a 10.6 per cent EBIT margin for H2 FY20.
We have a target PE of 17x (unchanged) on FY21e EPS, reflecting optimism on the ability to generate growth, and lower our target to ₹960.
Risk: Client-specific issues.