Nomura Securities Downgrades iGATE (IGTE) to Reduce

Nomura Securities downgraded iGATE (NASDAQ: IGTE) from Neutral to Reduce with a price target of $35.00 (from $29.00) saying the current multiple is unlikely to be sustainable.

Analyst Ashwin Mehta said, "News flow at iGATE has been positive with: 1) successive large deal wins over the past five quarters; and 2) revenue CQGR improving to 2.4% over the past four quarters (vs. 1.4% over the prior four quarters) and likely sustenance of our forecast of ~3% CQGR in the medium term. However, we are not too excited as: 1) our higher-than-consensus revenue expectations are largely unchanged; and 2) we believe its revenue growth is still likely to be below that for the industry. Also, our forecast EPS CAGR of 17% over FY13-15F, though impressive, is aided by significant interest expense savings of USD50mn per annum through debt refinancing. This does not warrant a permanent rerating in multiples as core EBITDA growth will mirror revenue growth of 11-12% over FY13-15F, in our view. Following the 22% rally over the past one month, we find valuations expensive at 17x FY15F EPS of USD2.38 (at par with CTSH and at a 20-30% premium to INFO/WPRO)."

For an analyst ratings summary and ratings history on iGATE click here. For more ratings news on iGATE click here.

Shares of iGATE closed at $38.35 yesterday.

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