Market Outlook
The market will take cues from the global markets and is expected to open on a flat note on Monday. Trade short inNifty below 5,380 levels else around 5,400, with stop loss placed at 5,420, targeting 5,330-5,300 levels.We expect markets to consolidate at current levels. Valuations are now reasonable and very much building in a slowdown in corporate profits. We continue to favor IT, private banks, media and FMCG sector. Given the interest rate sensitivity, we remain selective in auto. There are near-term concerns for the capital goods/infrastructure sector, but over a longer timeframe, we remain positive on the sector. We remain negative on the cement sector. Market may witness some range bound movements in coming sessions with higher volatility
Technical Calls
Buy Reliance Broadcast 75.20 target 85
Buy Bank of Mah. 56.30 target 65
Buy Century Textiles 359.00 target 365
Buy IFCI 47.80 target 50
Buy Talwalkars Better 241.15 target 255
Buy LIC Hsg. Fin. 226.00 target 235
Buy Raymond 386.60 target 395
Buy Simplex 298.50 target 305
Buy Edelweiss Capital 33.8 target 40
Buy ENIL 272.00 target 280
Buy Maruti Suzuki 1193.15 target 1200
Momentum Calls
Buy Religare 465.00 target 475
Buy Hindustan Copper 275.00 target 285
Buy Gulf Oil 90.00 target 95
Buy Tata Steel 553.15 target 560
Buy Time Techno 66.00 target 70
Buy GSK Pharma 2455.05 target 2465
Buy Clutch Auto 53.50 target 60
Buy HUL 320.00 target 325
Buy Granules India 87.00 target 90
Investment
KR Choksey has maintained `Buy` on Infrastructure Development Finance Company (IDFC) with aprice target of Rs 192 as against the current market price (CMP) of Rs 120 in its report dated Jun. 16, 2011. The broking house gave the following rationale:
Operating income up 21% y-o-y and 5% q-o-q:
Net interest income grew strongly by 50% y-o-y mainly driven by strong loan growth at 50% y-o-y, stable spreads and sequential sharp uptick in NII from treasury. Lending business contributed 76% of operating income during the quarter, whereas the share for non-interest income`s has declined from 30% in Q3FY11 to 23% on the back of lower capital gains, subdued fee income from asset management businesses. Total non-interest income decreased 46% y-o-y to Rs 1.52 billion due to lower capital gains. We expect Net interestincome to grow 26% CAGR over FY11-13E driven by strongloan growth comprising of infrastructure segment.
Stable lending spread q-o-q:
Core lending spread remained stable at 2.2% indicating return of reasonable pricing power. With diversification of liability franchise and targeting better yield on asset side, we expect IDFC to sustain core lending spread at 2.3-2.4% going forward.
Operating leverage playing out:
Operating expenses declined 22% q-o-q mainly due to upfront provisioning for bonus in previous quarters against year-end provisioning in Q4FY10. Cost to income ratio decreased 460 bps to 21.1bps sequentially; however, the management has guided us that cost to income ratio is likely to remain stable around 20-22% on the back of higher operating leverage going forward.
Loan book growth strong at 51% y-o-y:
Gross approvals and gross disbursement increased 40% y-o-y and 106% y-o-y mainly on the back of infrastructure financing space. Loan book grew 50% y-o-y and 4% q-o-q to Rs 36,304 cr driven by power and transportation sector which contributes 77% of total outstanding disbursement. In terms of product based distribution, project loans and corporate contribute 89% of outstanding disbursement, which upticks the loan book expansion. The management is targeting 3 balance growth over next three-four years, majority of growth would be front loaded. We believe current capital base coupled with internal accruals would be sufficient to support this strong asset growth.
Valuation & Recommendation:
IDFC performed strongly on lending side but disappointing on fee based businesses during the quarter. Strong loan growth, reasonable pricing power, relatively stable spreads were keyhighlights of the quarter. However, continuous disappointing performance from loan related fee and institutional broking businesses are cause of concern to us. We have cut earnings estimate 6% and 9% for FY12 and FY13 respectively factoring lower fee incomes and capital gains. We have also reduced our target price from Rs 206 to Rs 192 due to earnings downgrade. Unique business model, strong earnings growth outlook coupled with favourable risk-reward offers compelling investment opportunity in medium term. At Rs 120, the stock is trading 10.6 FY12 earnings and 1.5 FY12BV. Hence, we maintain our `Buy` rating on the stock with a target price of Rs 192 (Potential upside 60%).
Investment
Firstcall Research has recommended `Buy` on TechMahindra with a price targetof Rs 778 as against thecurrent market price (CMP) of Rs 688.9 in its report dated June 16, 2011. The broking house gave the following rationale:
Tech Mahindra reported a phenomenal rise in consolidated net sales for the quarter ended Mar. 31, 2011. During the quarter, the sales of the company increased 6.61% to Rs 12,615.30 million from Rs 11,832.90 million in the same quarter previous year. Net profit for the quarter declined 59.39% to Rs 921.90 million, while total income for the quarter rose 2.87% to Rs 12,932.80 million, when compared with the prior year period. Company posted earnings of Rs 7.32 a share during thequarter, registering 60.56% decline over prior year period. It has recommended dividend of 40% (i.e. Rs 4 per equity share of Rs 10 each), for the financial year ended Mar. 31, 2011, subject to approval by members of the Company.
The company announced its plans to set up BPO operations in
CanvasM, VAS subsidiary of Tech Mahindra (Q,N,C,F)* and part of the Mahindra Group, announced the launch of its unique service ``Saral Rozgar`` in strategic partnership with Rashtriya Rozgar Mission. CanvasM specializes in developing and deploying utility VAS solutions, applications and platforms for organizations globally. Saral as the name suggests, is a bouquet of easy-to-use utility services, accessible through a reachable medium such as voice.
Valuation:
At the current market price of Rs.688.90, the stock is trading at 10.52 x FY12E and 9.52 x FY13E respectively. Earning per share (EPS) of the company for the earnings for FY12E and FY13E is seen at Rs.65.45 and Rs.72.33 respectively. Net Sales and PAT of the company are expected to grow at a CAGR of 9% and 9% over 2010 to 2013E respectively. On the basis of EV/EBITDA, the stock trades at 7.13 x for FY12E and 6.48 x for FY13E. Price to Book Value of the stock is expected to be at 2.24 x and 1.81 x respectively for FY12E and FY13E. We expect that the company will keep its growth story in the coming quarters also. We recommend `Buy` in this particular scrip with a target price of Rs.778 for medium tolong term investment.
Visit the Blog http://www.bazaaredge.com/blog
Affordable Website Design + Hosting Plans start from Rs 4999 http://www.simplyweb.in
Disclaimer : This report is for the personal information of the authorized recipient and does not construe to be any investment, legal or taxation advice to you. And not soliciting any action based upon it. The report is based upon information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied upon such. We or any of its affiliates or employees shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report
----------------------------------------------
The message was checked by Zillya! Antivirus 1.1.3002.0, bases 2.0.0.675 - No viruses detected
No comments:
Post a Comment