Satyam Skyrockets As Results Exceed Expectations

Satyam (SAY) shares are soaring for the second straight day after the Indian IT company reported better than expected results for both the December 2008 quarter and for the months of January and February.

As the Wall Street Journal reported today, the company posted a surprised profit for its fiscal third quarter ended December quarter of $33.7 million.

In April, Tech Mahindra bought a 31% stake in the company, and announced an offer to buy another 20%, to give it voting control. The company nearly collapsed in January after then-chairman B. Ramalinga Raju confessed to falsifying financial records.

J.P. Morgan analyst Manoj Singla picked up coverage of Satyam today with an Overweight rating and a price target of 100 rupees, well above the previous day’s close at 66.80 rupees. “Tech Mahindra’s buyout of Satyam has had a positive impact on customer sentiment…and there is incremental business stability,” he writes in a research note. “Backed by the strong focus on cost-realignment (in line with revenues), direct interest from senior management in the Mahindra group and experience in running Tech Manindra, we expect Sataym to see a sharp turnaround in revenues and profits by end-2009/beginning 2010.”

Global Equities Research analyst Trip Chowdhry said the financial information Satyam released yesterday, which consisted of data which had been provided to potential bidders, suggests the company can earn 37 cents a share this year; applying a P/E of 14x, he comes up with a $5 target price.

Two days ago, $5 was looking pretty far off, but no more. SAY yesterday rose 92 cents, or 33.8%, to $3.64. Today, the stock is up79 cents, or 21.7%, to $4.43. That makes a two-day rally of nearly 63%.