Syntel (NASDAQ:SYNT)

Investment Thesis• High-growth IT Services & Consulting company with more

room to grow, still well-valued• Performs better than competitors• Focuses on two key industries• Opening in portfolio for company in this sector after ACN sale

About Syntel• Syntel provides IT services and outsourcing consulting• Focuses on banking & financial services companies and

healthcare & life sciences companies• Current operations in U.S. and India• ~90% of revenues from NA• ~10% from Europe

Evaluating Syntel• Provides a service• Proprietary information• Industry is deal-driven• Difficult to evaluate “product”

• Look at the numbers• Compare Syntel’s numbers to its competitors• Look at its growth

Competition• Infosys Technologies (NYSE:INFY)• Wipro (NYSE:WIT)• Cognizant (NASDAQ:CTSH)• iGATE (NASDAQ:IGTE)

Syntel vs. competitorsMarket Cap(in $B)

P/Eratio

Return onAssets

Return onEquity

Debt toAssets

Profitmargin

Grossmargin

EBITDmargin

Syntel 3.82 18.85 28.05 35.05 6.89 25.63 43.51 31.27Infosys 33.95 20.22 21.46 24.81 0 23.32 23.32 28.6Wipro 31.51 32.29 14.09 21.56 14.51 16.48 30.35 20.86Cognizant 29.71 25.27 17.48 23.87 0 14.31 41.76 20.66iGate 2.34 33.56 5.59 69.23 61.06 9.34 39.49 23.99

Recent growth• Q3 YoY• Revenue growth: 12.6%• Net Income growth: 15.4%

• Q1-Q3 YoY• Revenue growth: 12.2%• Net Income growth: 13.1%

Applications Outsourcing- Outsourcing software app development to a location where labor is less expensiveKnowledge Process Outsourcing- Outsourcing research and information gathering (i.e. market research, R&D, IP research, etc.)E-Business- Providing technology services such as implementing and maintaining web solutions, data warehousing/business intelligence, enterprise application integration, business process management and enterprise resource planning solutionsTeamSourcing- IT consulting services

Syntel is poised for the future• Opening GDCs in Phillipines• Expanding business into Asia• Plenty of room for growth in Europe and Asia• Banks will account for half of the worldwide IT spending in

2014 (IDC)• Estimates put healthcare IT spending between 10-20% of total

IT market with annual growth rates at 5-10%• SYNT has beat earnings estimates 19/20 most recent quarters