16 October 2010

Religare on Pfizer: Heading for a stronger & sustainable growth trajectory

Bookmark and Share Visit http://indiaer.blogspot.com/ for complete details 􀂄 􀂄


Pfizer Ltd
Heading for a stronger & sustainable growth trajectory
We initiate coverage on Pfizer India (PFIZ) with a BUY and a Sep ’11 target
price of Rs 1400 (25% upside). Despite its strong parentage, PFIZ has been
unable to record robust growth in the past. However, to boost growth and
increase penetration in the Indian market, it has spruced up its sales force
sizably. This move, we believe, will benefit PFIZ immensely, given its strong
brand building capabilities. Field force expansion and new product launches
would push up growth rates to 17-19% over the next two years (from flat
growth in CY07-CY08 and 11-13% in CY09-CY10). Also, EBITDA margins,
which are currently under pressure, are likely to expand 350bps over this
period as the sales force becomes more productive. Overall, we estimate a 20%
earnings CAGR, and thereby higher return ratios, over CY10-CY12E.
Valuations, at a PER of 14.1x CY12E are attractive. This apart, when its merger
with Wyeth materialises, PFIZ will corner a rank in the top10 slot domestically.
Expect 18% CAGR over CY10-CY12: Since the last few quarters, PFIZ has
consistently increased its field force (added over 1,000 people). This is likely to
aid a growth of 18%/21% in its core pharma business (87% of sales in CY10) in
CY11/CY12 against 12-13% in the past two years. Overall, we estimate 18%
revenue CAGR over CY10-CY12E.
Margin recovery ahead: Over CY08-CY10, PFIZ is likely to report 12% higher
revenues but 29% higher staff costs. However, an improving product mix would
limit the margin contraction to 260bps. We estimate the margin profile to
improve in sync with rising staff productivity.
Expect 20% earnings growth, higher return ratios over CY10-CY12: Higher
revenues and margins would enable PFIZ report a 20% earnings CAGR over
CY10-CY12. Also, an improvement in operating performance would increase its
return ratios from 15.6% to 17.4% over this period.
Attractive valuations; Buy: The stock is currently trading at a PER of 17.5x/14.1x
CY11E/12E earnings. These valuations are attractive, given the positively shifting
growth trajectory. Our target price of Rs 1400 is based on 18x Sep ’12 earnings,
a 22% discount to the sector lead GlaxoSmithKline Pharma (GSK), given PFIZ’s
lower return ratios. PFIZ’s target multiple is also at a 12% discount to its
historical trading mean.
Key risks: a) Higher competition in the domestic market. b) Regulatory hurdles. c)
Higher loans/advances to a privately held group company. d) High concentration
risk (two products generate ~30% of sales) e) Higher product launches by parent
through privately held companies.

16th Oct, 2010: Grey Market Premium Prices for India IPO

Bookmark and Share Visit http://indiaer.blogspot.com/ for complete details 􀂄 􀂄



Company Name
Offer Price
Premium
(Rs.)
(Rs.)
Commercial   Engg
127
(Upper Band)
DISCOUNT
Oberoi Realty
260
(Upper Band)
8 to 10
B S Trans
247 to 257
DISCOUNT
Prestige Estates
172 to183
DISCOUNT
Gyscoal Alloys
65 to 71
10 to 12
Coal India
225 to 245
11 to 12

Axis Bank: maintain BUY target price of Rs.1825; says Kotak Sec

Bookmark and Share Visit http://indiaer.blogspot.com/ for complete details 􀂄 􀂄


AXIS BANK
PRICE: RS.1564 RECOMMENDATION: BUY
TARGET PRICE: RS.1825 FY12E P/E: 15.1X, P/ABV: 2.9X
Good performance on core operating front; gross NPA was
contained due to higher write-offs, despite elevated slippage…
Axis bank reported strong growth in its net interest income (40.5%)
buoyed by strong growth in its loan book (36.5% YoY; however, muted
growth of 1.8% QoQ) along with 16 bps YoY improvement in margins. Its
net profit grew 38.3% on back of robust growth in its core business and
moderate growth in provisions & contingencies.
Non-interest income declined marginally to Rs.10.33 bn during Q2FY11
(decline of 3.0% YoY) on back of lower trading profit (decline of 51.6%).
During the same period, fee income grew moderately at 18.0% YoY;
however, it lagged overall business growth.
It continued to display superior liability franchise which is visible in terms
of its CASA mix (41.5% at the end of Q2FY11). Its NIM improved (16 bps
YoY) on back of lower cost of funds (decline of 66 bps YoY) which is
underpinned by strong CASA mobilization.
In absolute terms, gross NPA inched up marginally (1.6% QoQ) due to
higher write-offs, despite elevated slippage witnessed during Q2FY11.
During the same period, net NPA declined slightly on higher provisions
done by the bank. As a result, coverage ratio improved to 80.1% (including
prudential write-offs).
Restructured book has performed better than our expectations. At the end
of Q2FY11, cumulative restructured book stands at Rs.20.6 bn (1.86% of net
advances).
We have slightly tweaked our earning estimates for FY11 & FY12. We are
also rolling over the target multiples to FY12E estimates. We maintain BUY
rating on the stock with the target price of Rs.1825 (revised upward from
Rs.1490) based on P/ABV of 3.4x its FY12E adjusted book value and P/E of
17.5x its FY12E earnings.

Mastek: Q1FY11 result analysis: Dismal performance again, SELL says ICICI Sec

Bookmark and Share Visit http://indiaer.blogspot.com/ for complete details 􀂄 􀂄


Waiting on the sidelines…
Mastek continues to face multiple operational headwinds. In Q1FY11,
US and European revenues declined by 2.6% and 9.4% QoQ and 18.2%
& 22.1% YoY, respectively. Development revenues declined 10% QoQ
and 9.7% YoY due to sluggish incremental revenues from large clients,
coupled with revenue reversals in the Asian geography. Staff costs
increased by 8.4 percentage points (pp) to 73.7% vs. 65.3% in Q4FY10
as the company effected 3.5% onsite and 20% offshore wage hikes.
From a services perspective, investments in Elixir versions are yet to
yield meaningful results while revenue growth from the government
vertical remains feeble. We believe visibility is at its trough and would
wait on the sidelines with our SELL rating till clarity emerges.
􀂃 Q1FY11 result analysis: Dismal performance again
Mastek reported Q1FY11 revenues of Rs 148.9 crore vs. our Rs
160.9 crore estimate and net loss of Rs 13.5 crore vs. our estimated
loss of Rs 8 crore. Revenues declined 8.8% QoQ and 21.4% YoY.
Gross margins came in at 17.1% vs. 30% in Q4FY10 as the company
gave 3.5% onsite and 20% offshore wage hikes in Q1FY11, resulting
in Rs 11 crore of incremental expenses. EBITDA margins declined
9.6 pp QoQ to -4.9% (ICICIdirect.com estimate: -2.8%) vs. 4.7% in
Q4FY10 as its clients cut down on IT spending.
􀂃 What next?
We expect Mastek to report Q2FY11 revenues of Rs 151 crore, flat
QoQ and an operating loss of Rs 3.3 crore on an EBITDA margin of -
2.2%. For the full year FY11, we expect Mastek’s revenues to
decline 13% to Rs 621 crore vs. Rs 714 crore in FY10. The company
could report a net loss of Rs 19 crore in FY11 vs. Rs 68 crore profit
in FY10.
Valuation
The company has been continuously underperforming in the last few
quarters. The order book executable over the next 12 months stands at a
modest Rs 312 crore. On the back of continuously deteriorating business
fundamentals for the company largely due to poor execution and weak
near term outlook, we rate the stock as SELL.

ICICI Securities: Pick of the week: Patni Computers

Bookmark and Share Visit http://indiaer.blogspot.com/ for complete details 􀂄 􀂄


Buy the management…
Patni Computers Ltd is one of the oldest and the sixth-largest IT
solution providers in India. The company provides IT services, mainly
focused on banking, financial services, manufacturing and telecom
verticals. Its service gamut includes application development and
maintenance, enterprise solutions, embedded technology service and
product engineering services. More than 78% of the company’s
revenues come from US and the rest from EMEA and APAC regions.
􀂃 New management and approach
The senior management has been restructured over the last 1.5
years to gear up the growth level, which was facing headwinds due
to lack of management focus, attrition and low growth from top
clients. The new management is focusing on micro verticals and
trying to tap emerging markets like APAC. This will be beneficial for
the company in the longer term as its revenue concentration in the
US geography is high, which needs to be addressed. Further, with
proven cost management during the downturn, the company has
proved its ability to sustain margins.
􀂃 CHCS acquisition could yield incremental revenues
Patni acquired CHCS in June 2010 for a consideration of US$6
million. This will enable it to serve as third-party administrator for its
insurance clients. Also, it has acquired a managed service platform
from one of its manufacturing clients at US$13 million. This will give
it a stable revenue stream from it as well as enable it to market it to
other clients in the same domain.
􀂃 Demand landscape looks bright
The management has indicated that it is witnessing broad-based
growth with a healthy deal pipeline. Out of this, two or three deals
have a total contract value (TCV) of $30-50 million each. Patni
intends to hire 1,500 net employees in H2CY10 to map into the
demand. Also, it saw attrition abating in Q3CY10 with higher growth
likely from Europe despite challenging macro conditions.
Valuation
Since discretionary expenses are coming in for Indian IT companies and
the managements’ optimistic commentary, we expect 12% revenue
CAGR over CY09-CY12E. The stock is currently trading at cheap
valuations of 11.5x CY11E EPS and 11x CY12E EPS of Rs 40.6 and Rs
42.7, respectively. Thus, we recommend the stock as Pick of the Week.
We have valued the stock at 12x CY12E EPS with a target price of Rs 516
with 10% upside from current levels.

Reduce recommendation on LIC Housing by Kotak

Bookmark and Share Visit http://indiaer.blogspot.com/ for complete details 􀂄 􀂄


LIC HOUSING FINANCE
PRICE: RS.1458 RECOMMENDATION: REDUCE
TARGET PRICE: RS.1300 FY12E P/E:12.8X
q Healthy mortgage loan growth of 36% yoy drives the earnings; overall
performance better than our expectation with net profit growth of 37%
yoy to Rs.2.34bn
q Core interest income remains strong during Q2FY11; NIM under pressure
due to rising cost of fund
q Asset quality improves sequentially, along with improved provision coverage;
LICHF targets a 0.5% GNPA level
q Rolling over our estimates to FY12, revising our price target to Rs. 1300,
valuations appear rich therefore maintain Reduce recommendation


Healthy mortgage loan growth drives the earnings; overall performance
better than our expectation
LICHF's Q2FY11 performance is better than our expectations, supported by strong
growth in advances and improvement in assets quality. LICHF has reported mortgage
growth of 36% yoy to Rs. 433.8bn aided by a 35.8% yoy growth in disbursements
to Rs. 51.0bn. The strong growth in business is attributable to improved retail
demand; however, LICHF's developer's loan sanctions and disbursements have
also grown at relatively faster pace. LICHF's outstanding developer's loan book
forms close to 11% (10% in Q1FY11) of the total loan book.

Core interest income remains strong during Q2FY11; NIM under
pressure due to rising cost of fund
LICHF has reported a strong growth in its core earnings supported by improved interest
income and steady growth in its processing fee income. Overall interest income
(including retail and developers) grew by 31.7% yoy to Rs.10.4bn from
Rs.7.8bn in Q2FY10. Growth in interest income from developer's loan book was
relatively strong at 58.7% in the backdrop of strong growth in developers loan and
higher interest yields.
NIM for Q2FY11 witnesses some pressure following increase in the cost of funds as
the overall interest rates have started moving northwards during Q2FY11. LICHF
reported a NIM of 2.94% as compared to 3.0% (lower by 6bps qoq) in Q1FY11.
NIM is impacted by a 6bps sequential increase in cost of funds to 7.9% and also
due to pressure on yield on developer's loan.
With the 50 bps increase in benchmark rate and re-pricing of its assets, LICHF is
expected to maintain NIM at around 2.9%-3% for FY11 since close to 65% of its
loan book is on a floating rate while 58% of its liabilities are at fixed rate.
Asset quality improves sequentially, along with improved provision
coverage; LICHF targets a 0.5% GNPA level
LICHF has reported improvement in its asset quality for Q2FY11, with gross NPA of
0.74% as compared to 0.92% in Q1FY11. Its net NPA ratio has also improved to
0.21% from 0.35% seen in Q1FY11 on the back of steady recoveries and sequentially
improved provision coverage of 71.8% from 62%. For FY11, LICHF is targeting
to maintain provision coverage of over 82% and expecting material improvement
in its asset quality.
Rolling over our estimates to FY12, revising our price target to
Rs. 1300, valuations appear rich therefore maintain Reduce recommendation
We are now rolling over estimates for LICHF to FY12 and accordingly revising our
price target for the stock (dividend discount model based) to Rs. 1300 (includes
value of 20% stake in LICMF). We expect advances growth of 30%yoy for FY11
and 23% yoy for FY12 to Rs. 495.0bn and Rs.606.4bn respectively. We expect net
profit of Rs.9.6bn and EPS of Rs.101 for FY11 and net profit of Rs.10.85bn and EPS
of Rs.114 for FY12.
At the current market price the stock is trading at P/Ex of 14.4x and P/ABV of 3.4x
its FY11 estimates and P/Ex of 12.8x and P/ABVx of 2.8x its FY12 estimates. LICHF's
valuations appear rich and therefore we continue to maintain our REDUCE recommendation
for the stock.

Kotak recommends Accumulate Infotech enterprises after quarter results

Bookmark and Share Visit http://indiaer.blogspot.com/ for complete details 􀂄 􀂄


INFOTECH ENTERPRISES LTD (IEL)
PRICE: RS.175 RECOMMENDATION: ACCUMULATE
TARGET PRICE: RS.199 FY12E P/E: 10.4X
Infotech's results were a mixed bag. While revenues were higher than
what we had expected, EBIDTA margins once again disappointed.
Consequently, PAT for 2QFY11 was marginally lower v/s our estimates. EMI
volumes were up by 13% and UTG reported a 6% organic growth, which is
encouraging. Ramp up of existing projects and new project initiations
helped, we opine. The management has indicated billing rate pressures in
new projects and at the time of re-negotiating long term agreements. This
is of concern to us. Margins were flat (organically) QoQ, which was
disappointing in light of the severe fall witnessed in 1Q. The company had
to resort to further increments for scarce resources. This validates our
concerns about mid sized companies facing pressures on salaries due to
strong hiring by larger peers in a buoyant sector. Overall, we reduce our
earnings estimates for FY11 to Rs.13.2 v/s Rs.14.1 earlier. We introduce our
FY12 estimates and expect EPS to be Rs.16.8. Consequently, our PT stands
revised to Rs.199 v/s Rs.189 earlier. At our target price, FY12 estimates will
be discounted by about 12x. We believe this discount to larger peers is
justified due to the limited visibility on FY12, pressure on billing rates and
on margins. We maintain ACCUMULATE. We believe that, Infotech will
have to address the above mentioned concerns before we turn more
positive on the stock. We are also concerned about the relatively high
proportion of project-based revenues (in UTG), client concentration for IEL
(Top 5 makes about 40% of revenues) in addition to currency fluctuations.

target price of Rs 1506 for LIC Housing, says ICICI Securities,

Bookmark and Share Visit http://indiaer.blogspot.com/ for complete details 􀂄 􀂄


Results in line, growth targets robust…
A strong 8% sequential jump in advances by LICHF shows that the
home loan segment is seeing good volume surge in the industry. This
led to a 63% jump in NII to Rs 305 crore in line with expectations. NIM
continued its slide QoQ at 2.93% from 3.01% in Q1FY11. We expect NIM
to stay close to 2.8% over FY10-FY12E. The PAT grew 37% YoY to Rs
234 crore slightly above our estimate on account of lower provisions.
We estimate that PAT will grow at 24% CAGR over FY10-12E.
􀂃 Credit growth robust, Q2 developer loans disbursement - higher…
The loan book continues to be skewed in favour of retail assets
where the individual loan book comprised 88.7% and project loans
(developers, etc) are at 11.3% of total loan book, which rose 36%
YoY to Rs 43385 crore. However, in Q2FY11, developer loans have
seen incremental disbursements forming 21% of the incremental
loan book of about Rs 6,000 crore. Sanctions and disbursements
surged 36% and 43% YoY, respectively. Considering the strong
credit numbers, we have revised our growth estimate of FY11 and
FY12E to 28% and 22%, respectively, taking the book size to Rs
48,743 crore in FY11E and Rs 59,573 crore in FY12E. Accordingly,
NII and PAT have also been revised upwards.
􀂃 Clean asset book and strong return ratios maintained
GNPA and NNPA remained under control at 0.74% and 0.21%,
respectively. With substantial portion of loans being retail, we do not
expect any major spike in NPAs. Return ratios continue to be high
with RoE at around 24% and RoA at around 2.19% for the quarter.
We believe RoE over 20% and RoA over 1.8-2% are sustainable.
Valuation
Higher return ratios of over 20% RoE and 1.8-2% of RoA led to
considerable premium over BV. Now, the buzz on the banking licence is
an added trigger. We expect LICHF to maintain its asset quality and
growth momentum. Hence, we value the stock at 2.8x its FY12 ABV to
arrive at a target price of Rs 1506 (including Rs 19 from LIC Mutual Fund).

Infosys has target price of Rs 3195 says ICICI Securities,

Bookmark and Share Visit http://indiaer.blogspot.com/ for complete details 􀂄 􀂄


Mind the growth…
Infosys reported 10.2% sequential US dollar revenue growth - a first
since Q2FY08 and raised its dollar revenue growth guidance to 24-25%
vs. 19-21% earlier. Positive commentary on Europe, transformational
deals signed and improved hiring targets (40,000 heads vs. 36,000
earlier) suggests good demand visibility. However, attrition remains a
key concern.
􀂃 Operating Metric Highlights
Application development grew 12% YoY and 2% QoQ and stood at
15.6% of the revenues. Consulting & system integration grew 14%
and 50% QoQ vs. 0.4% and -2.2% growth in Q1FY11, respectively.
Product engineering continues to see demand momentum with 31%
QoQ growth on top of 22% QoQ growth in Q1FY11. From a vertical
perspective, BFSI had another strong quarter with 8% QoQ growth
vs. 9% QoQ in Q1FY11. Retail grew 20% QoQ as clients continue to
spend top dollars before the holiday season. Geographically, Europe
grew 18% QoQ and the company saw demand uptick in Germany
and France. Top client revenues grew 5.7% QoQ while top 5
(excluding top 1) and top10 (excluding top 5) grew 17% and 12%
QoQ. It added 27 clients in Q2FY11 and signed nine transformation
deals with two having contract value of >$200 million.
􀂃 Up-tick in onsite mix good but attrition remains a concern
Infosys added 14,264 gross heads while net additions were 6,186.
Noticeably, onsite effort increased 1.6 percentage points (pp) to
24.5% vs. 22.9% in Q1FY10 due to likely client ramp ups. This could
translate to demand for offshore heads in sequential quarters.
However, LTM attrition increased to 17.1% in Q2FY11, up 1.3 pp
compared to 15.8% reported in Q1FY11. Though the absolute
attrition numbers have fallen QoQ, we believe high attrition rates
could pressure volume growth, going forward.
Valuation
Positive commentary from management on Europe and discretionary
spending suggests good traction across verticals and service lines.
Consequently, we expect revenues and net profit to grow at 23% and
15% CAGR during FY10-FY12, led by volume growth at ~22% CAGR and
value the stock at 22x FY12 EPS of Rs 145 i.e. with a 12 month target price
of Rs 3195 per share. We continue to recommend an ADD rating.

Karvy on Idea: Maintain 'Under performer' rating; target price of Rs 66

Bookmark and Share Visit http://indiaer.blogspot.com/ for complete details 􀂄 􀂄


Idea: Stretched valuations, no positive triggers in sight
• Valuations at 7.5x EV/EBITDA at a premium to Bharti, little scope for upside:
Idea's stock trades at an EV/EBITDA of 7.5x FY12E EBITDA, an 8% premium
to Bharti (6.9x EV/EBITDA). We believe this is not justified owing to Bharti's
superior operating metrics. Bharti reported EBITDA margins of 36.1% v/s
24.3% for Idea (1QFY11), return on equity of 16.6% v/s 7.7% for Idea (FY11E)
and had a net-debt equity ratio of 0.1x at the end of FY10 (0.6x for Idea).
Even post-Zain and debt taken on for 3G spectrum, we expect Bharti's net
debt-equity ratio to stand at 0.9x and 0.6x in FY11 and FY12, respectively
as compared with 1x and 0.8x, respectively for Idea Cellular.
• 3G service launch unlikely to have significant impact on financials: We have
factored in 3G revenues for Idea post receipt of 3G spectrum last month.
We forecast 1.6 mn 3G subscribers in FY12 and ARPU of Rs 600/month,
leading to 7% and 6% increases in FY12E top-line and EBITDA, respectively.
Owing to higher amortisation costs of Rs 2.9 bn (20-year amortisation
period for 3G spectrum costs), net profit falls by 19% v/s earlier estimates.
We believe it could take 3-4 years before Idea can witness returns on its
3G investments.
• MNP, another headwind: Mobile number portability (MNP) is to be launched
in India on October 31, 2010, which is likely to be another headwind for
the sector. MNP is likely to lead to a price war in the post-paid segment of
the market and could hurt margins going forward by 100 bps.
• Maintain 'Under performer': We maintain an 'Under performer' rating on
Idea Cellular owing to expensive valuations with a target price of Rs 66,
implying an EV/EBITDA multiple of 7x FY12E EBITDA.

Indiabulls research previews Sept quarter (2Q F2011) for State bank of India

Bookmark and Share Visit http://indiaer.blogspot.com/ for complete details                           


State Bank of India (SBIN IN, CMP: `3232; TP: `2718; Underperform)
• State Bank of Indore merger took place on 25 August 2010. We have readjusted numbers for proportionate number of days.
• We expect NIMs to remain stable as CASA growth remains robust, International margins improving from ~0.7 to ~1% and deposit growth to remain muted.
• We expect asset quality to witness some pressure with slippages to be higher at Rs. 40 bn. While we expect slippages from restructured book to be lower than our earlier estimates of 20%

Timken India Ltd- Multi bagger idea by Anand Rathi

Bookmark and Share Visit http://indiaer.blogspot.com/ for complete details 􀂄 􀂄


Investment Argument

Company is 80% subsidiary of Timken Inc. and is one of the niche playersin Bearing segment with strong technological support from global parent. It manufactures a range of ‐ Tapered Roller Bearings for MCVs/HCVs/ Tractors/Railways & Infrastructure equipments.

It sells to OEMs as well as in replacement markets plus meets global requirements of Timken group. Similarly for the local requirements, it sources from Timken’s global Mfg bases also.

Company is working to make products for Heavy trucks, Infrastructure equipments and Railways/ Metro Rail applications also.

With the strong revival of demand and tremendous potential in all these segments; the performance of company is likely to improve significantly.

Capacity utilizations, so far were very low [appx 30% till Dec.’09], maygo up in current and coming years, leading to high volumes and better margins.

It’s a Zero Debt company with large cash in its books and no capex plans in near term. So with improving outlook, positive cash flow will grow only.

The possibility of open offer for buy back can’t be ruledout either.
Recommendation
With improving demand outlook from user industry, the performance in current and coming years will improvesignificantly. For Dec.’11 we expect company to report EPS of Rs 15‐16, leading to expected price target of Rs 300/‐in 12 months time frame. BUY

Infosys Technologies' Q2FY11 results (Outperformer): says IDFC Research

Bookmark and Share Visit http://indiaer.blogspot.com/ for complete details 􀂄 􀂄


Infosys (CMP: Rs3076)            
Mkt Cap: Rs1.8tr; US$41bn       Bloomberg code (INFY IN)
 
Key result highlights
 
·         Healthy quarterly results: Revenues grew ~10% qoq and ~30% yoy to US$1,496 m (ahead of IDFC exp: US$1,468m). Further, driven by INR weakness, revenues were Rs69bn – a growth of ~12% qoq and ~24% yoy (IDFC Exp: Rs68bn). EBIT margin increased by ~190bp qoq (in line with expectations); net profit was Rs17.4bn (in line with expectations); and EPS was Rs30.4 – an increase of 16.7% qoq and 13.2% yoy (in line with expectations).
 
·         Strong demand momentum: In consolidated IT services, the company reported volume growth of 7.2% qoq while pricing improved 2.4% qoq in constant currency terms, helped 0.7% qoq by cross currency tailwinds. Strong volume-led growth underpinned strong demand for offshore IT services. In constant currency, onsite pricing was up 2.4% qoq while offshore pricing was down 0.4% qoq. The management expects the pricing to remain stable.
 
·         Supply-side challenges abating: The company saw gross hiring of ~14,000 employees and net hiring of 7,600 employees. TTM attrition inched up to 17.1% (+1.3% qoq)though the management indicated that absolute employee attrition for Q2 was lower than that in Q1. Infosys is promoting ~12,000 employees starting Oct-10 – this will lead to ~US$7m impact in Q3. Annual gross hiring target rose to 40k with 11k seen in Q3FY11.
 
·         Outlook still very conservative: The management raised FY11 USD revenue growth outlook by ~4% to 24-25%. This builds <2% qoq growth in Q4 on top of conservative ~4% qoq growth in Q3 – the management remains conservative and we expect another beat-and-raise Q3FY11. INR-terms guidance reflects stronger local currency.
 
·         Management commentary positive yet cautious: In H1FY11, Infosys won nine transformational deals as well as nine large outsourcing deals. It indicated that clients were spending in line with IT budgets and discretionary spend has returned. However, the company has cautioned that the overall macroeconomic environment still remains challenging with limited visibility beyond a few quarters and most of the work focused on cost efficiencies.
 
Valuations and view: Strong quarterly revenues, healthy operational performance and a well-managed supply side show flawless execution from the IT bellwether. Q3 and FY11 guidance still builds lot of conservatism, and we maintain our Street-high estimates. While global macroeconomic environment remains the key variable for FY12 forecasts, we believe that Infosys is one of the best placed to manage the uncertainty and leverage growth opportunities. Trading at ~25x FY11E and ~20x FY12E EPS, we rate Infosys as Outperformer with a 12-month target of Rs3,600 (based on 23x FY12E EPS). We expect the stock to moves sideways till some clarity emerges on the economic front and CY11 IT budgets.

Indiabulls research previews Sept quarter ( F2Q 2011) for ICICI Bank

Bookmark and Share Visit http://indiaer.blogspot.com/ for complete details                           


ICICI Bank (ICICIBC IN, CMP: `1,138; TP: `1,052; Outperform)
• As BOR got merged with ICICI Bank during the quarter our 2QFY11E numbers include BOR on proportionate number of days basis while 2QFY10 and 1QFY11 numbers are standalone.
• We expect margins to remain flattish with CASA % maintained at current levels and uptick in margins for international business despite hike in deposit rates.
• Fee income growth is expected to be ~5% YoY in line with improvement in sanctions.
• Advances to grow 2.3% QoQ (decline of 1.2% YoY) due to higher disbursements in retail. Sanctions to remain healthy especially on the infrastructure side providing comfort on the growth going forward.
• Provisions are expected to decline to `6.47bn vs `10.7bn in 2QFY10, primarily due to the unsecured advances book running down.

RESULT UPDATE Infosys Technologies — ‘Beat’ and ‘Raise’ continues says Ambit

Bookmark and Share Visit http://indiaer.blogspot.com/ for complete details 􀂄 􀂄


RESULT UPDATE
Infosys Technologies — ‘Beat’ and ‘Raise’ continues

We believe that Infosys’ FY11E US$ revenue guidance upgrade of 4-5% (to +24-25% YoY) and increase in gross hiring target by 11% reinforces our view of a strong demand environment. EPS guidance upgrade of 0.2-2.5% (to Rs115.1-117.1) was lower due to rupee appreciation (US$/INR assumption at Rs44.5). We continue to believe that strong offshoring momentum, pick-up in discretionary spending and strong growth in top-10 clients will drive robust growth in FY11-13E. While rupee appreciation worries have come back to haunt the sector, we believe that a reasonable rupee appreciation can be managed. We continue to maintain BUY with a September 2011 target price of Rs3,670 (22x TTM 2Q FY13E EPS).
  • FY11E guidance upgrade reinforces our confidence on the demand trajectory: Infosys has again positively surprised on the FY11E US$ revenue guidance upgrade to US$5.95-6.0bn, implying growth of 24-25% YoY (v/s Ambit est. of 22-24%). We believe that guidance upgrade infuses further confidence on the demand trajectory. 3QFY11E revenue guidance at US$1,547-1,562 mn, implies a growth of 3.4-4.4% QoQ. 3Q is a seasonally weak quarter given the lower number of billing days. The guidance however, implies a flat-1.3% QoQ growth in 4QFY11E, which in the light of the strong revenue beat in this quarter appears overly conservative. The company has also revised its gross hiring target for FY11E upward by 11% to 40,000 (v/s 36,000 earlier).
  • EPS guidance upgrade by 0.2-2.5%, primarily lower due to rupee appreciation: Despite a strong FY11E US$ revenue guidance upgrade, EPS guidance (at Rs115.1-117.1) has been upgraded only by 0.2-2.5% (v/s earlier Rs112.2-116.7) due to rupee appreciation (US$/Rs at Rs44.5 v/s earlier at Rs46.45). Guidance factors in a margin decline of 130bps (v/s earlier 150bps).
  • 2QFY11 revenue higher than expectation, driven by volumes and increase in pricing realization: 2QFY11 US$ revenue at 1,496mn increased by 10.2% QoQ (v/s estimate of 8.3%) and was higher than the upper end of guidance by 5.1%. Volumes grew strongly at 7.2% QoQ in IT services, while the pricing realization increase of 3.2% QoQ was a positive surprise. Constant currency pricing realization improved by 2.5% QoQ, which management attributed to a change in the services mix. The company also reported strong deal wins during the quarter-9 transformational deals in 1HFY11, out of which 6 have been won in 2QFY11 (many >US$100mn and couple of them >US$200mn TCV).
  • EBITDA margin increase of 167bps lower than estimate: EBITDA margin at 33.3% implies a increase of 167bps QoQ (v/s est. +220bps). Margin increase was primarily led by increase in pricing realization (+3.2% QoQ), utilization (74.3% in 2QFY11 v/s 73% in 1QFY11; including trainees) and exchange rate movements (+80bps). PAT at Rs17.37bn increased by 16.7% QoQ (v/s est. 16.1% QoQ despite increase in tax rates (26.6% v/s 25.4% in 1QFY11).
  • Retail, Energy & Utilities and Europe were the trailblazers: Retail (+19.9%) and Energy & Utilities (+15.4%) verticals grew at a scorching pace while Insurance also grew well at 11.2% QoQ. Management mentioned that while they are witnsessing a decline in the core M&A work, there is incremental demand in risk management and regulatory compliance areas.
  • Geography-wise, Europe witnessed a strong comeback (18.1% QoQ in US$ terms, 15.6% in cc). Management mentioned that they are seeing increased traction in Telecom and BFSI verticals in Europe. Amongst service lines, consulting and PI (+13.9%), system Integration (+49.2%), engineering services (+30.9%) and testing (+14.4%) were the primary growth drivers. Further there was strong growth in the top 2-5 client (+16.2% QoQ) and top 6-10 clients (+12.0%).
  • Attrition rate continues to head upwards: Attrition at 17.1% continues to shoot up (15.8% in 1QFY11). However, management mentioned that they are witnessing a reduction in attrition rates on a MoM basis since August and the absolute numbers are lower in 2QFY11 at ~4,200 (v/s ~5,400 in 1QFY11). The promotion cycle (benefiting 12,000 employees) which has been planned for 3QFY11E could also help arrest the attrition rates. Management noted that the promotions were considered in the earlier FY11E EPS guidance as well.
  • Maintain BUY with Sep-11 TP of Rs3,670: We are marginally increasing our EPS estimates to Rs122.5 (+3%) and Rs151.3 (+2.0%) for FY11E and FY12E respectively. We are also introducing our FY13E estimates  expect EPS at Rs184.1 (+21.7% YoY). The stock currently trades at 25.2x and 20.4x  on FY11E and FY12E EPS. We continue to believe that higher offshoring momentum, pick-up in discretionary spending and strong growth in top-10 clients will drive strong growth in FY11-13E. While rupee appreciation worries have come back to haunt the sector, we believe that a reasonable rupee appreciation can be managed. We continue to maintain our BUY recommendation with a target price of Rs3,670 (22x TTM 2Q FY13E EPS).

Indiabulls research previews Sept quarter (2Q F2011) for Punjab National Bank

Bookmark and Share Visit http://indiaer.blogspot.com/ for complete details                           


Punjab National Bank (PNB IN, CMP: `1,307; TP: `1,276; Outperform)
• We expect NIMs to be flattish QoQ because of rise in deposit rates.
• We expect fee income growth to be in line with growth in advances, i.e., ~20%. Treasury income is likely to be lower than last year.
• Provisions are expected to be higher than 1Q primarily on account of fresh slippages from restructured accounts.

Indiabulls research previews Sept quarter (2Q F2011) for HDFC Bank

Bookmark and Share Visit http://indiaer.blogspot.com/ for complete details                           


HDFC Bank (HDFCB IN, CMP: `2,380; TP: `2,297; Outperform)
• We are factoring a 32% growth in advances due to strong traction seen in retail segments like auto, housing, and CVs. We expect personal loans and credit cards to grow at a slower pace due to the conscious strategy adopted by the bank.
• We have factored a 6bps drop in margins QoQ while remaining flattish YoY primarily to factor in recent deposit rate hikes.
• We expect 15% growth in Fee income due to pressure on income from sale of third-party products.
• Loan loss provision is expected to be much lower at ~0.9% vs 1.6% in 1QFY11 primarily due to the improving macro environment

Indiabulls research previews 2Q Fiscal 2011 (Sept quarter) for Union Bank of India

Bookmark and Share Visit http://indiaer.blogspot.com/ for complete details                           


Union Bank of India (UNBK IN, CMP: `385; TP: `381; Outperform)
• We expect deposit repricing benefits to continue with average yields rising faster than increase in cost of deposits. A 10bps improvement in margins QoQ is also expected.
• Fee income growth should be marginally lower then growth in advances due to pressure on income from sale of third-party products.
• We expect provisions to be relatively higher than in 1QFY11 due to slippages of `7bn expected during 2QFY11. We are estimating provisions of `2.8bn in 2QFY11 vs `1.97bn in 1QFY11

UTV's 2QFY11 Operationally In-line says Citi research

Bookmark and Share Visit http://indiaer.blogspot.com/ for complete details 􀂄 􀂄


UTV Software Communications (UTVS.BO)
2QFY11 Operationally In-line; Gaming – The Joker in the Pack
 In-line quarter — EBIT growth of ~180% Y/Y to ~Rs420m was largely in line with
our/consensus estimates. Margins for both movies & TV increased Y/Y – a mix of
a) business turnaround and b) partly buoyed by the inventory write-off against the
net worth, which boosted ‘reported’ profits. Revenues at ~Rs2.4bn were flat Y/Y &
headline PAT increased ~4x on last year’s low base to Rs402m.
 Debt equity remains >1x — Increasing leverage is a concern – net debt increased
~Rs1bn QoQ to ~Rs10bn. As per FY10 annual report, net worth declined by
Rs6bn driven by the inventory write-down – mgmt indicates the split between
movies & broadcasting verticals was ~Rs4.5bn & ~Rs1.5bn respectively.
 Gaming – the joker in the pack? — We are currently ~35% below mgmt’s FY11E
Ignition revenue guidance as we build in some delays; however, we have ~18%
EBIT margins in FY12E assuming sale of ~1m units of El Sheddai and Reich.
Visibility on pre-sale agreements, publisher/distribution tie-ups, timelines of the
final launch (will depend on publisher), and status of the other 6-8 planned
publishing titles are important events to watch out for. Mgmt highlighted that
Indiagames has turned to black this quarter & Truegames too is expected to break
even in FY11E; however, Ignition is the key for overall segmental performance.
 Key points to focus on — a) Visibility of gaming launch timing and any indicators
determining financial performance; b) increased gearing and impact on cost of
debt; c) return ratios for movie business given the gradual reduction in business
volatility; and d) margin performance of broadcasting in future.
 Maintain Sell — Despite a marginal cut to our FY11-12E revenues forecasts, we
increase our EBIT estimates by 29-35%; factoring both the inventory write-down &
good movie business performance in 1HFY11. We reiterate Sell/High Risk and
revise our SOTP-based target price to Rs505 as we roll forward to Mar12E from
Sept11E. The stock has underperformed the market by ~115% in the last 2 years;
i t has been flat relatively in the last 6 months.

Indiabulls research previews Bank of India for 2Q 2011 (Sept Quarter)

Bookmark and Share Visit http://indiaer.blogspot.com/ for complete details                           


Bank of India (BOI IN, CMP: `551; TP: `UR; Under review)
• We are factoring muted growth in advances at 19.5% YoY as disbursements have been lower than we expected.
• We are factoring a ~10bps improvement in margins due to higher CASA growth and 25bps increase in BPLR.
• Slippages are expected to be sequentially lower as most of the pain has already been felt in last few quarters. We are factoring fresh slippages at `5.3bn in 2QFY11 vs `6.2bn in 1QFY11.
• We expect credit costs at 0.64% in 2QFY11 vs 0.71% in 1QFY11 as we are expecting slippages to be lower, which will lead to decline in provision charges. We are factoring provision charges at `3.63bn vs `3.86bn in 1QFY11.

Bank of Baroda preview by Indiabulls research

Bookmark and Share Visit http://indiaer.blogspot.com/ for complete details


Bank of Baroda (BOB IN, CMP: `969; TP: `803; Neutral)
• We are factoring a 27% growth in advances in 2QFY11, which is lower than the 30% factored in 1QFY11.
• We expect NIMs to improve by 12bps due to better yields in international advances as yields have improved from 0.7% earlier to 1% currently.
• Treasury income will be under pressure as yields have moved up.
• We estimate Provisions charges at `3.2bn vs `2.5bn in 1QFY11 due to higher slippages from restructured accounts

Indiabulls research: Axis bank preview

Bookmark and Share Visit http://indiaer.blogspot.com/ for complete details


Axis Bank (AXSB IN, CMP: `1,542; TP: `1,529; Outperform)
• We expect cost of deposits to be relatively higher in 2QFY11 primarily on account of repricing of bulk deposits which constitute 40% of total deposits. We are factoring a marginal decline in margins.
• Slippages for the current quarter would be in line with last 3 quarters. Slippages from restructured advances are likely to be higher in 2HFY11 primarily on account higher slippages from restructured accounts
• We are factoring a 36% growth in advances in 2QFY11 primarily on account of base effect which we expect to moderate to 25% by year end.

Oberoi Realty IPO Allotment Details are out

Bookmark and Share Visit http://indiaer.blogspot.com/ for complete details 􀂄 􀂄

Click here for Oberoi Realty IPO Allotment Details


you will need your application number

Indiabulls research: Financial Services 2Q 2011 preview: Mixed bag

Bookmark and Share Visit http://indiaer.blogspot.com/ for complete details

Financial Services 2Q 2011 preview: Mixed bag

We expect banks to maintain their QoQ NIMs, while other income is expected to be under pressure due to subdued treasury profits because of hardening of G-sec yields by 40bps QoQ. We expect their fee income growth to be in line with growth in advances, while income from sale of third-party products would be under pressure due to changed ULIP guidelines. Asset quality should to be better than earlier expected on the back of an improving macro economy, with slippages lower than earlier guidance. We continue to prefer ICICI Bank and PNB though we believe valuations across the sectors have run the course in the short term. We believe that there are too many expectations built in the stock prices and valuations in most of the cases are above 1.5x standard deviation over the 6-year average multiples. Hence we would wait for the quarterly trends to see the actual performance to review our target prices and recommendations.

Axis bank Sept quarterly results review by Motilal oswal,

Bookmark and Share Visit http://indiaer.blogspot.com/ for complete details 􀂄 􀂄


Axis Bank (AXSB IN, Mkt Cap $14.4b, CMP Rs1,564, Buy) 2QFY11 PAT grew 38% YoY to Rs7.35b. While profit growth is line, NII growth surprised us positively (4% higher than expected) led by better margin performance. Stable margins at 3.68% (3bp QoQ decline), CASA growth (36%) and adj fee income growth of 23% were key positives. Continued higher slippages and credit cost, moderate loan growth QoQ and sharp increase in other operating expenses were the key negatives.

Key highlights:
-          On a lower base, loans grew 37% YoY (on a base of 18% YoY growth in 2QFY10) and 2% QoQ to Rs1.1t, led by large corporate loans.
-          CASA growth was strong at 36% YoY on an average daily basis; average daily CASA ratio stood at ~40% (stable QoQ).
-          Other operating expenses increased ~17% QoQ to Rs7.6b as branch and ATM expansion accelerated during the quarter.
-          Slippages stood at Rs4.4b leading to annualized Slippage ratio of 1.7% vs 2.2% in FY10. This includes slippages of Rs920m from restructured loans. Outstanding standard restructured loans stood at Rs20.6b (~1.9% of the loan book)
-          On back of higher write offs, GNPA and NNPA remained stable QoQ in absolute amount. Including prudential write offs, PCR stood at 80.2% vs 76.6% a quarter ago.

Strong balance sheet growth YoY on a lower base
-          Loans increased by 37% YoY and 2% QoQ in 2QFY11. Growth in the quarter is driven by large corporate loans. Large corporate loans grew 6% QoQ, whereas agri declined 15% QoQ. SME and retail loans remained flat QoQ. On a YoY basis, Corporate loans grew 59% whereas, agri, retail and SME grew ~15%
-          In our view, reported loan growth in 3QFY11 will look very strong at 35%+ due to lower base; however on a higher base, growth will moderate to 25% in 4QFY11. We are keeping FY11-12 growth estimates unchanged at 25%.To grow 25% YoY in FY11; bank will have to grow 17% from 1HFY11 levels. Mgmt maintained its loan growth guidance of 1.3x of industry growth.
-          Deposits growth as picked up during the quarter with growth of 6% QoQ and 36% YoY (on a lower base). The proportion of wholesale deposits (calc) remained stable at 45% QoQ however, higher than 40% a year ago.
-          CASA growth on average daily basis stood at 36%, SA growth stood at 41% YoY and CA growth was 28% YoY. Reported CASA ratio stood at ~40% (stable QoQ)


Strong core operating profit growth of 27% YoY and adjusted growth of 31% YoY
-          Trading profits declined during the quarter to Rs1.1b vs Rs2b in 1QFY11 and from Rs2.2b in 2QFY10
-          Operating expenses increased 28% YoY and 10% QoQ to Rs11.6b, which is ~6% higher than our estimates. Other operating expense increased ~17% QoQ as branch and ATM expansion accelerated during the quarter. Bank increased its reach to 1,103 branches & extension counters and 4,846 ATMs.
-          Cost to Core income ratio has remained stable QoQ and YoY at 46%.

Valuation and view
-          While we remain cautious about the asset quality, we believe strong core operating profits growth will help the bank to absorb the higher credit cost. Nevertheless, we expect the NPA provisions to remain flat (on a higher base) on a YoY basis and credit cost to decline to 1.2% vs 1.5% a year ago on back of lower slippages ratio of 1.75% vs 2.2% a year ago.
-          We expect the bank to report a loan growth of ~25% CAGR and fee income growth of ~22% over FY10-12. In our view, core operating profitability and fall in credit cost will drive the earnings growth in FY11.
-          We upgrade our profit estimates by 1% for FY11 and 3% for FY12, to factor in higher NII growth however, partially compensated by increase in operating expense.
-          We estimate BV of Rs460 and Rs541 in FY11 and FY12 respectively. We expect EPS to be Rs79 in FY11 and Rs100 in FY12.
-          Stock trades at 3.4x FY11E BV, 2.9x FY12E BV and 20x FY11E EPS, 16x FY12E EPS. We expect RoE of ~19% in FY11 and ~20% in FY12 and RoA of ~1.6% over FY10-12.
-          Maintain Buy with FY12 based revised target price of Rs1,730 (3.2x FY12 BV), 11% upside from current levels.