The Hindu Business Line : Geometric Software: Hold

Citing delays in ramp-up of specific projects by clients and partners, Geometric indicated it is expecting only a "mid-single digit" sequential growth for the July-September quarter compared to a planned double-digit growth.

On account of lower employee utilisation levels, its bottomline is likely to be impacted adversely. The company, which had lowered the revenue and earnings guidance to 32-40 per cent and 37-45 per cent in the last quarter, has decided not to offer a revised lower guidance.

As the stock has shed over 10 per cent in the past week and 17 per cent over the past month, the valuation has impounded these changes to a large extent. In this backdrop, we reiterate our `hold' recommendation made in June for investors with an investment horizon of over a year for three reasons.

One, the business model of Geometric focusing on the product lifecycle management (PLM) solutions servicing industrial customers and software OEM's continues to be sound. The senior management has confirmed that there are no signs of slowdown in this marketplace and the order pipeline remains quite strong.

Two, as most of the delayed projects, attributed largely to organisational restructuring, have started in the second quarter, Geometric's performance is likely to come back on track over the next few quarters. Three, as the order flows from industrial customers and products look up in the coming quarters, the operating margins, which had slipped in the first quarter, will move back to the high teens.

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