Tech Mahindra
Reco: HOLD
CMP: Rs787
Target Price: Rs810
Marginal beat on estimates, retain HOLD
· Rev(ex H/W) at US$ 265 mn(+5.4% QoQ) beat exp marginally. Mgns (ex H/W) at 21.5%, were up by ~280 bps QoQ driven by favorable currency, higher utilization & lower employee count
· Top client rev were flat in constant currency terms at ~GBP 75 mn while revenues(ex BT, SI ) were up by 8.5% sequentially to US$ 150 mn
· Tweak FY11/12E conso EPS up by ~2.8%/0.3% to Rs 69.6/77.5 despite higher rev est. driven by higher currency reset helped by lower FY12 tax assumptions at 21%(V/s 23% earlier)
· Maintain HOLD with a revised TP of Rs 810 (based on 11.5x 1 yr fwd P/E). See near term upsides driven by possibility of a favorable merger ratio( for TechM) with Mah Satyam
Patni Computers
Reco: NOT RATED
CMP: Rs465
Target Price: N.A.
In line quarter, Disappointing Guidance for Q4CY10
· Rev at US$ 178.8 mn, marginally ahead of est. Mgns at 18.9%, were down by ~130 bps QoQ impacted by strong hiring (net adds of 1,663, +11% QoQ), impact of consolidation of CHCS
· Profits at Rs 1.3 bn ahead of est. driven by higher than expected forex gains. See margin pangs continuing driven by supply side pressures( attrition at near peak levels)
· Despite strong hiring, co's Dec'10 rev guidance is muted. Patni's rev growth continues to be anemic with strong margin defence until now getting threatened as expected by us
· Tweak CY11E EPS down by ~5.7% to Rs 35.3 driven primarily by lower margin assumptions (partly on a/c of higher currency reset). At Rs 465, Patni trades at 13.1x/11.7x CY11E/12E EPS
United Phosphorus
Reco: BUY
CMP: Rs202
Target Price: Rs230
Results below estimates
· Q2FY11 results were marginally lower than estimates due to weak margins with RPAT of Rs 1.15 bn, +12%yoy
· Implied H2FY11 revenue and EBITDA growth of 33% and 52% on higher side – may risk FY11 management guidance
· We have adjusted downward our FY11 revenue, EBITDA and APAT estimates by 5.8%, 2.9% and 1.5%, respectively
· Maintain BUY recommendation with target price of Rs 230 based on 12x FY12 estimates. Growing profit contribution from India is likely to drive valuations going forward
Ultratech Cement
Reco: REDUCE
CMP: Rs1,100
Target Price: Rs1,040
Numbers Disappoint. Maintain REDUCE
· PAT at Rs1.16 bn (-79.2% qoq) – below estimates led by lower realizations & higher P&F & staff costs. Revenues decline 19.4% qoq-volumes down 12.4%, realisations down 8%
· Lower realizations and cost pressure dragged EBIDTA down by 59% qoq. EBITDA/t at Rs448 down 53.4% qoq. Downgrade FY11 earnings by 16.2% (EPS Rs54.8)
· With recent cement prices hikes, expect the worst phase of profitability to be over for UTCL
· Upgrade target to Rs1,040 (valuing UTCL at EV/EBIDTA of 8X EV/Ton of USD130. However rich valuations at PER of 16.6X & EV/ton of USD135 leaves little upside. Maintain REDUCE
NTPC
Reco: HOLD
CMP: Rs198
Target Price: Rs190
MAT grossing to hit ROE by 4%; Downgrade to Hold
· Results disappoint (APAT down 2%) due to (1) grossing up ROE at MAT, (2) Kahalgaon/Farakka continue to report lower PAF (70%) on fuel constraints & (3) lower interest income
· Changed the grossing up to MAT rate frm earlier full tax rate; to hit profits by Rs10bn or 4% of core ROE from 28% to 24%
· Reduce earnings by 11-13% in FY11E/12E
· Valuations at 2.3xFY12E Book value, not attractive on core ROE of 24% (Earlier 28%); Lower target price to Rs190/Share; Downgrade to 'Hold'
DB Corp
Reco: HOLD
CMP: Rs284
Target Price: Rs284
Results miss est., Cut rating to HOLD
· Q2FY11 PAT grew by 20.8% yoy to Rs550mn, below our estimate of Rs770mn impacted by sharp rise in opex towards new launches
· Advertisement revenues grew by 16% yoy to Rs3bn equally led by volume and price growth
· Cut EPS estimate by 10% /2% to Rs13.6 /14.6 for FY11E/12E due to higher than expected opex on new launches
· Downgrade rating from ACCUMULATE to HOLD with target price Rs284
Union Bank of India
Reco: HOLD
CMP: Rs393
Target Price: Rs400
Provisioning hits bottom-line; downgrade to HOLD
· UBI's Q2FY11 net profit at Rs3.0bn (-40%yoy), significantly below expectation led by higher provisioning and opex
· The NII at 15.4bn inline with expectation, led by 30bps expansion in NIMs, albeit advances remaining flat qoq
· The slippages during the quarter were higher at Rs11.3bn (3.6% annualised) including Rs4.2bn from agriculture NPAs, Rs760mn from restructured pool & Rs2.2bn from one big a/c
· Valuations expensive at 1.7x FY12E looking at sharp slippages and provision requirements. Downgrade to HOLD rating with TP of Rs400
Asian Paints
Reco: HOLD
CMP: Rs2,503
Target Price: Rs2,510
Volume Allude, Maintain HOLD
· Asian Paints (APL) reported mixed performance – revenue growth at 5% yoy missed expectation and APAT growth at 4.4% yoy meets expectation
· Volume growth alluded in the quarter- on back of high volume growth in Q1FY11 leading to pipeline filling and higher dealer inventory
· Maintain earnings for FY11E (Rs92.2/Share) and FY12E (Rs104.6/Share) – Maintain 'HOLD' rating with target price of Rs2,510/Share
Marico
Reco: HOLD
CMP: Rs135
Target Price: Rs128
Price Hike Initiated, Maintain HOLD
· Marico's Q2FY11 performance meets expectation - revenue growth of 12.5% yoy to Rs7.8 bn and APAT growth of 14.8% yoy to Rs715 mn
· Implemented price hike to offset material price inflation - 13% in 'Parachute' and '10%' in 'Saffola' rice bran oil
· Satisfactory volume growth at 15% yoy - 'Parachute' grew by 10%, 'Saffola' grew by 18% and 'Hair oil' grew by 27%
· Maintain earnings estimates of Rs4.9/Share and Rs5.8/Share for FY11E and FY12E – Maintain 'HOLD' rating with price target of Rs128/Share
Voltas
Reco: BUY
CMP: Rs246
Target Price: Rs275
H2FY11 Promise; Retain BUY
· Results marginally below estimates with (1) 3% yoy decline in revenues to Rs10.7 bn (2) 140 bps yoy drop in EBITDA margins and (3) 17% yoy decline in PAT to Rs746 mn
· EMP division performance negatively impacted due to slower execution on international orders & one-off expenditure
· Order inflows up 76% yoy to Rs8.5 bn – YTD secured 44% of FY11E target order flows. Order book at Rs49.7 bn – equivalent to 1.4X standalone FY10 revenues
· Maintain earnings estimates and Maintain 'BUY' with target price of Rs275/Share
TRF
Reco: ACCUMULATE
CMP: Rs689
Target Price: Rs754
Negative Surprise Galore, Downgrade to Accumulate
· Q2FY11 results is loaded with negative surprise due to (1) one-offs provision of Rs0.3 bn and (2) dismal revenue booking in Projects division
· Fires another salvo – revised Ebidta margins guidance from 10% to 7% - for reasons less understood and unexplainable
· Downgrade in earning estimates for FY11E (down 43% to Rs36.1/Share) and FY12E (down 34% to Rs58.4/Share)
· 20% drop in market capitalization partly discounts earnings revision - Downgrade from 'BUY' to 'ACCUMULATE' with revised target price of Rs754/Share
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