Stock Review: TAKE SOLUTIONS

Headquartered in Chennai, Take Solutions is a technology company with domain expertise in supply chain management (SCM) and life sciences. The company has a strong presence in the US and Asia Pacific. It serves over 400 customers across 16 countries.

The company has taken the organic and strategic acquisition routes to enter into new product segments or to strengthen its presence in a particular market. Recently, it acquired UK-headquartered WCI Consulting Group, which will help the company to enhance its footprint in Europe.

GROWTH DRIVERS

WCI is likely to add 80-90 crore to the company's top line and increase the overall revenue contribution from Europe to 20% over the next three years.
Take has also expanded its presence in the Middle East and Asia region, where it is witnessing healthy growth. This will help the company to diversify its client base and insulate the business from regional slowdowns. At the end of March 2011 quarter, the company held a strong order book, driven mainly by life sciences and US and Asia Pacific. SCM business has seen a slowdown with a flattish order book position over the past three quarters. But the company has a positive outlook going ahead.

FINANCIALS

The company has recorded consistent growth with double-digit rise in the bottom line over the past three quarters. In the March 2011 quarter, net profit rose by 13% at 22 crore against the previous quarter. The top line grew over 20% to 150 crore for the same period. However, its operating profit margin remained stagnant at 18.4%. This can be attributed to a huge increase of 13% in employee costs relative to sales.

VALUATIONS & CONCERNS

At the current market price of 41.3, the stock trades at nearly seven times its earnings for the trailing twelve months. Take looks fairly-priced as compared to its peers such as Polaris Software and KPIT Cummins which are trading at a P/E of 9 and 16, respectively. The company appears well-positioned to cash in on growth in industry verticals and a rise in discretionary spends. But it is heavily dependent on the US, which accounts for over 63% of its total revenues.