Wednesday, October 27, 2010

Result Update: Tech Mahindra; Patni Computers; United Phosphorus; Ultratech Cement; NTPC; DB Corp; Union Bank of India; Asian Paints; Marico; Voltas; TRF

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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