Ramky Infrastructure: Target Price (Rs.) 366 Upside 23%: Greshma

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Executive Summary Ramky Infrastructure Limited (RIL), the flagship of Ramky Group, is an integrated infrastructure construction & development management company in India with strategic emphasis on the PPP approach. RIL is currently executing over 200 projects in various segments viz. Water and Waste Water, Buildings, Irrigation, Power Transmission and Distribution, Roads and Bridges, and Industrial Construction projects valued over Rs 16,500 crore, across 22 States and two Union Territories in India making it a diversified national player.
Concerns Highly working-capital-intensive operations leading to average capital structure Fragmentation in the infrastructure industry Higher dependence on government spending Intense competition in the construction business other than the water & waste-water segment Execution Capability for BOT road business being a new entrant. Slowdown in awarding of the projects.
Key Investment considerations Strong order book provides visibility over long term Diversification – Sectoral & geographical presence BOT assets to be cash remunerative Strong presence in Waste water Segment Increasing spend on Infrastructure projects

Buy Bharat Bijlee: Target Price (Rs.) 1225; Upside 34% : Greshma

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Bharat Bijlee Ltd BUY
Horizon 12 months
Target Price (Rs.) 1225
Upside 34%


Investment Rationale
 Numbers to continue the uptrend
Company’s sales registered a growth of 22% in PAT to ` 150.7 mn yoy and the sales grew by 10% to ` 2025.5 mn on yoy basis. The numbers were fueled by the volumes growth of 20% in motors and better margins in transformer segment. We expect the company to post positive numbers in FY11 due to lower base effect.
 Market Value of Equity Investments `386 per share and value of liquid investments held at and `90 per share
BBL, which recently holds substantial part of its investments in Siemens and HDFC are now trading at magnificent premium over its cost of acquisition. The value of investments at current market prices after discounting fairly by 50% and adding holdings in liquid investments sums up to ` 283 per share.
 End-to end presence in power equipments
The company operates in the manufacturing of transmission& distribution transformers and also motors and elevators. The major focus of the company remains on the growing demand from the transformer segment, growing volumes in motors helps it to hedge the falling realizations.

Mastek Ltd -BUY Target Price (Rs.) 210; Upside 25% :: Greshma

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Mastek Ltd -BUY


Target Price (Rs.) 210; Upside 25%



Investment Rationale:
Q2 FY11 Result Highlights: During the quarter Q2 FY11 Operating Income for the company stood at Rs. 149.8cr up by 0.6% sequentially and declined by 21.5% Y-o-Y basis, this decline is primarily due to decline in the revenue from Government vertical which was heavily impacted after the BT channel stopped outsourcing incremental work to the company, also there were delay in orders due to elections in UK. Company has incurred the losses of Rs. 27.6cr in Q2 FY11 as compared to profit of Rs. 23.5cr in Q2 FY10, this loss is mainly due to Impairment of goodwill amounting to Rs. 20.7cr and higher depreciation of Rs. 2.4cr. During the quarter company have added 2 new clients and the current order book stood at Rs. 296cr.
Inflow of fresh orders: Management has indicated that they are expecting the traction in order book. Mastek have done the partnership with one of the UK based company which will help the company to initiate projects from UK government. Also there was delay in getting orders from UK due to elections and also lot of orders was on hold, right now the things are stabilize and we believe company will get more orders by Q3 of this fiscal from UK as company has a very strong presence in UK.
Outlook
In Q1 FY11 management has indicated that the company is working on a margin improvement and serving better to the existing clients which will help the company to come back to the healthy growth profitability. Considering the opportunity in insurance vertical in which Mastek has an ample of experience we advise our investors to buy the stock at CMP of Rs. 167.7 for the target price of Rs. 210. At CMP the stock is trading at price earning ratio of 15.3x at its FY11E EPS of Rs. 11 which is 15-20 percent discount to its peers. As on Q2 FY11 company has a cash and cash equivalent of Rs. 152cr, which is approximately Rs. 56 per share which is ~33.3% of the CMP


Trend in Order Book (Rs. in cr) :
Order book has seen declining trend on q-o-q basis, however we are expecting new order inflow from UK government


Revenue by Industry (Rs. in cr):
Sharp decline seen in government vertical this is primarily due to BT channel stopped outsourcing incremental work to the company, we expect this vertical to improve going ahead


 The stock has seen a sharp decline since Dec’09 from the 460 levels and is currently trading around 167.
 There are a series of positive divergence observed and there is a possible pullback rally on cards to 190-195 levels.
 The Prices are currently below the long term100 & 200 Dma.
 The intermediate trend remains bearish and the decline is likely to halt around the 140-145 levels.


Company Profile
Mastek incorporated in 1982, is engaged in providing software solutions and integration services. Mastek a leading IT solutions player with global operations in providing new technology and IP-led enterprise solutions to insurance, government and financial service organizations worldwide
Today, Mastek has grown to become a US $227 million Corporation.
The company has employee strength of 3400 professionals. The company has partnered with various IT giants for delivering quality product and services namely Microsoft, Oracle and IBM are amongst others


Key Investment considerations
Opportunity in Insurance vertical
Revival of UK Economy
Inflow of Orders
Strategic Partnership with UK based company to gain traction in government vertical

Buy TAKE Solutions :Target Price (Rs.) 52; Upside 73%: Greshma Research

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Investment Rationale:
Steady growth and improvement in productivity by FY12 are likely to reduce the gap in valuations
Margins of TAKE Solutions have witnessed traction over the past 6 quarters; top-line of the company has grown by 13% CQGR over the past 6 quarters whereas EBITDA margin has increased by 20% CQGR and PAT by 35% CQGR over the past 6 quarters. We expect the company to grow by 35% CAGR for the next three years considering revenues from WCI acquisition and traction seen in both Life Sciences and SCM vertical.