The Hindu Business Line : Satyam Computer gains on better margins hope

SATYAM Computer today touched a new high and was the major gainer among index stocks on analyst's expectation of improved profit margins and on volume growth expectation for the next two quarters.

The stock rose 5.34 per cent on the BSE to close at Rs 719.40, a new high for the stock. On the NSE, it closed at Rs 718.50, up 5.26 per cent.

"The 120 basis points margin expansion in second quarter of 2005-06 was the first material reversal after many years of steady margin erosion for Satyam. In our view, steadier volume growth has enabled Satyam to look at optimising its selling, general and administration cost line, and the process has more way to go," said a report released by foreign broking firm CLSA on Wednesday.

It said the margin improvement would continue on course for the next two quarters (December 2005 and March 2006), followed by a dip in June 2006 as the next year's salary raises come into play, and some pull back in the remaining three quarters.

Brokers said several of the foreign funds have also been buying the shares of Satyam Computer along with Infosys Technologies.

"There has been a lot of foreign funds interest in the shares of Satyam Computer after the September quarter results and this interest has gained further momentum," said a dealer with a foreign broking firm.

Due to the volume growth and improved profits margins, CLSA has upgraded earnings by six per cent for 2007 financial year and 10 per cent for 2008.

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