The Hindu Business Line : Geometric Software: Buy

Shareholders may also retain their holdings in the company. The stock trades at a price-earnings multiple of 12 times its consolidated per share earnings of Rs 39 for 2003-04.

Investors have to, however, bear in mind the fact that a good chunk of the revenue and post-tax earnings growth for the company may accrue in the second half of 2004-05.

According to the management, the margins of Geometric may come under pressure in the first and second quarter of 2004-05 on account of expected salary increase, increased on-site activities and product investments.

For 2004-05, Geometric has projected the following:

Total revenue growth of 35-40 per cent in rupee terms, translating into revenues of Rs 151.7 crore - Rs 157.3 crore.

Net profit growth of 27-31 per cent in rupee terms, translating to Rs 26.5 crore-Rs 27.3 crore.

Industrial customers to contribute 30 per cent of consolidated revenues of the company.

These projections appear achievable as Geometric, which is a focussed player in the PLM (product life cycle management) space, has broadbased its service offerings over the past few years.

Apart from servicing OEM vendors and industrial customers through partners in the auto, aerospace or manufacturing vertical, Geometric has added engineering services and refined its PLM products portfolio to its suite of offerings recently.

The engineering services started operations in December 2003. It is increasingly working towards converting its strategic industrial partners into an Offshore Development Centre (ODC) relationship.

This kind of relationship is more enduring; scaling-up is faster; and has the potential to yield higher margins over time.

Financial contours

For 2003-04:

Geometric clocked consolidated operating revenues of Rs 106 crore (before other income), a 26 per cent growth over the previous year;

The operating profit margin crawled down by about 0.4 percentage points to 27.3 per cent. The post-tax earnings over the same period rose 22 per cent to settle at Rs 20.84 crore;

Offshore contribution stood at 74 per cent (up from 73 per cent) along with an increase in onsite component to 17 per cent from 12 per cent in the previous year;

The top five and ten customers contribute 68 per cent and 80 per cent of revenues;

The contribution of rest of world (including Asia Pacific) roseto 12 per cent from 4 per cent of revenues in the previous year. To that extent, the contribution of the US and Europe has come down.

For the fourth quarter

The operating revenues of Geometric were quite strong, with a 13 per cent sequential (quarter-on-quarter) growth at Rs 30.9 crore;

On a sequential basis, the operating profit margin fell 0.65 percentage points to 27.5 per cent. The post-tax earnings also declined to Rs 5.34 crore from Rs 6.09 crore in the immediately preceding quarter;

While the offshore contribution remained steady at 71 per cent, there was an increase in onsite component by one percentage point to 19 per cent.

In addition, engineering services division saw a ramp-up with two partners signing up and one migration project coming in from a US automotive major.

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Quiz

2003-04: A year which rewarded risks

FII flows into mutual funds — Mid-caps set to benefit

Equity: The election effect

Time for the laggards to catch up

Magnum Balanced Fund: Hold

HDFC Tax Plan 2000: Buy in phased manner

Alliance Basic Industries

DSP Merrill launches TIGER fund