Well positioned
Capitalising on opportunities in IT infrastructure management services andembedded systemsA
51% subsidiary of Tata Consultancy Services, CMC is a leading
systemsengineering and integration company in India, offering
application design, development,testing services and asset-based
solutions in niche segments through turnkey projects. Thecompany has
over 10,700 employees spread across India, the US, the UK, Europe,
MiddleEast, Africa, and Asia-Pacific. Its business is structured around
four strategic businessunits (SBUs): customer services (CS), IT-enabled
services (ITeS), systems integration(SI), education and training
(E&T).
The CS SBU focuses on
creating solutions and providing services for theIT infrastructure
requirement covering infrastructure architecture, design and
consultingservices; turnkey system integration of large network and data
centre infrastructures. Thescope of services includes supply of
associated equipment and software, on-site and remotesupport services at
multi-locations for IT infrastructure of domestic and
internationalclients.
The SI SBU
undertakes solution deployment including embedded systems,software
development, software maintenance and support, turnkey project
implementation,and systems consultancy. It has been one of the key
drivers of the transformation towardsmore value-added business with a
view to improve overall margin. The SI SBU continues toinvest and grow
its solution asset base so that it can offer innovative solutions
aroundthe core intellectual properties of these assets. These include
enhancements ofbiometrics-based assets for identity management, mining
assets for mining solutions,transportation assets, insurance and
financial solution assets, and e-governance assets.
The
ITeS SBU provides a variety of ITeS including business
processoutsourcing and knowledge process outsourcing for front-end and
backoffice. This SBU hascreated specific business domain expertise such
as on-demand software services; officerecords digitisation and document
management; recruitment and examination resultsmanagement; legacy data
migration management. Also, the ITeS SBU continues to work for
theElection Commission as a state-level agency. The ITeS SBU has taken
initiatives toleverage its experience in handling large national
projects for more rewardinginternational geographies and has over the
years been one of the main drivers to increaseinternational revenue of
the company.
The E&T SBU offers education and training solutions for corporateorganisations, government institutions, and individuals.Revenue
increased by 48% to Rs 452.28 crore due to 55% increase inrevenues from
(SI) to Rs 264.38 crore (58% of total revenue) and 66% increase in
revenuesfrom ITeS business to Rs 71.35 crore (16% of total revenue) in
the June 2012 quarter overthe June 2011 quarter. The operating profit
margin was flat at 16.6%. Net profit grew 68%to Rs 58.43 crore and the
profit after tax margin increased 150 basis points to 10.92%. About
64.9% of revenue were from the international business, growing16% over
the March 2012 quarter and 66% over the June 2011 quarter. North
Americas grew 8%over the quarter and 40% over the year in dollar terms.
Services grew 10% over the quarterand 52% over the year contributing 91%
of revenue.
CMC added 20 clients in the
June 2012 quarter. These clients are in ofinsurance, transportation,
energy, resource and utilities and the government sector. Theseare all
strategic long-term clients.
In India,
higher growth is expected to come from two and three tiercities and the
small and medium enterprise sector. CMC’s countrywide presence
andpartner network can be leveraged to capitalize on this growth. The
company’se-Pragati initiative started in 2010 specifically targets this
opportunity. Cloudcomputing and virtualisation is proving to be
disruptive change in IT business. It isadapting this technology for its
own use as well as a part of its offerings.
Convergence
of mobility and web is opening several opportunities fornew
applications for mobile access to the system particularly in the area of
businessintelligence and reporting. Existing applications also need
enhancements to incorporatethese technologies. With core competency in
mobile technology as well as embedded systems,CMC will tap these
opportunities.
CMC continues to look
forward to building a momentum in product-basedsolutions and services
and at the same time it is looking at how it can addressopportunities in
the emerging geographies like Middle East and Africa, where the
companysees considerable replication potential for its products and
solutions developed forIndian markets.
We expect CMC to register EPS of Rs 73.8 in the fiscal ending March 2013. The share price trades at Rs 968. P/E works out to 13.
Table
| CMC : Consolidated Financials | ||||
| 1003 (12) | 1103 (12) | 1203 (12) | 1303 (12P) | |
| Sales | 870.73 | 1084.4 | 1469.34 | 1965.17 |
| OPM (%) | 18.6 | 19.4 | 15.3 | 15.4 |
| OP | 161.73 | 210.71 | 224.32 | 302.17 |
| Other inc. | 18.88 | 11.8 | 17.46 | 25.7 |
| PBIDT | 180.61 | 222.51 | 241.78 | 327.87 |
| Interest | 3.3 | 0.22 | 0.02 | 0.04 |
| PBDT | 177.31 | 222.29 | 241.77 | 327.83 |
| Dep. | 9.85 | 10.46 | 21.37 | 29.22 |
| PBT | 167.45 | 211.83 | 220.4 | 298.61 |
| Tax | 24.23 | 32.42 | 68.59 | 75.09 |
| PAT | 143.23 | 179.41 | 151.81 | 223.52 |
| EPS (Rs)* | 47.3 | 59.2 | 50.1 | 73.8 |
| * Current equity of Rs 30.30 crore. Face value: Rs 10. | ||||
| Figures in Rs crore. | ||||
| Source: Capitaline Databases | ||||
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