Brokers call: March 2012

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Bonanza

Bharat Forge (Buy)

CMP: Rs 320

Target: Rs 360

BFL has delivered a good set of numbers during Q3FY12, with net profit on standalone basis grew by 25 per cent y-o-y to Rs 103cr. EBITDA margin expanded by 140 bps on sequential basis on the back of favourable product mix. Going ahead, revival of automotive industry in the US and Europe is expected to drive the export growth further. BFL's diversified portfolio of auto and non-auto segment could act as a support towards slowdown in a particular industry. The stock is trading at earnings multiple of 19.4x of FY12E. Investors can buy this stock for a target of Rs 360 in the medium-term.

IDBI Capital

Infosys (Accumulate)

CMP: Rs 2,859

Target: Rs 2,765

Infosys Q4 guidance indicated low near-term visibility due to delayed decision making, and longer time for ramp ups. Despite improvement in recent data points released in US, the management has not experienced any significant change in overall business environment except for timely closure of IT budgets. Most clients have closed CY12 IT budget which is flat-to-down, and are now in allocation mode.

Clients are allocating budget for shorter periods (2-3 months) for the past 2-3 years compared to yearly allocation in pre-2008 period, largely due to uncertain environment. The stock has appreciated by nine per cent since Q3 results due to flight to safety and attractive valuations. We continue to prefer HCLT and TCS over Infosys due to better visibility. Maintain ‘Accumulate' with a TP of Rs 2,765.

Kotak Securities

Gujarat Apollo (Buy)

CMP: Rs 137

Target: Rs 170

Gujarat Apollo has been observing sluggish demand across Mobile Equipment Group divisions. Public spending in new road construction and maintenance has slowed down due to 1) increase in interest rates; 2) issues related to land acquisition and environmental clearances continues to affect execution; 3) elections in five States including Uttar Pradesh led to a halt in Government spending. We believe that the company is well positioned to benefit from the likely recovery in road construction and maintenance activity in India over FY13. We maintain our ‘Buy' recommendation with a one year DCF based unchanged price target of Rs 170.