Technicals- Sterlite Industries, Subex, PSL, Foseco India, Balrampur Chini,Fresenius Kabi Oncology:: Business Line

Technicals: Future Capital Holdings, Subex, Jaiprakash Associates, Lanco Infratech, Havells, Axis Bank, GVK ::Business Line

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Please let me know the outlook for Future Capital Holdings and Subex.

N. Gopalakrishnan

Future Capital Holdings (Rs 127.2): This stock has not really gone anywhere over the last three years. It is vacillating in the band between Rs 100 and Rs 300 since March 2009. This range is likely to shackle the stock in the months ahead also and provide a lucrative trading band within which short-term investors can play around.

Future Capital Holdings is currently close to the floor of its long-term trading range at Rs 100; it has been trying to stabilise above this level over the last couple of months. Investors with a greater penchant for risk can buy the stock at current levels with stop at Rs 95. Those holding the stock can also continue to do so with the same stop-loss. The stock could move higher to Rs 180 or Rs 198 where investors with medium-term perspective can offload some holdings.

Targets on move beyond Rs 198 are Rs 230 and Rs 302. Long-term outlook for the stock will turn positive only on strong weekly close above Rs 302. Next long-term target would be Rs 520.

52-WEEK FLOP: SUBEX ::Business Line

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Sell SUBEX AZURE LIMITED (SUBEX); Target Rs 47 :: Kotak Sec,

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SUBEX AZURE LIMITED (SUBEX)
PRICE: RS.42 RECOMMENDATION: SELL
TARGET PRICE: RS.47 FY12E P/E: 4X
We terminate our coverage on the stock
Subex's performance for 2QFY12 was marginally higher than our estimates.
The company has sold off its activation business (a part of the Syndesis
acquisition made earlier). The business was incurring losses at the EBIDTA
levels. However, the company has declined to give the details of the sales
consideration. We find this surprising though we believe that, the
consideration would have been negligible. Moreover, at the current market
price, we expect Subex to counter problems in repaying the FCCBs worth
$94mn which are maturing in March 2012. We believe that, conversion into
shares may not happen looking at the price differential between the
conversion price and the CMP. We are concerned on the above - mentioned
issues and hence, recommend exiting the stock, till there is more certainty
on the same. We terminate coverage on the stock. We may re-initiate
coverage after getting more clarity on the financials.

Query Corner: Long-term correction seen in SAIL :: Business Line

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I want your opinion on Patni Computer purchased at Rs 563 and SAIL bought at an average rate of Rs 160.

Ravindra Davda

Patni Computer Systems (Rs 367.5): Patni Computer has long-term resistance around Rs 575 where it peaked in June 2007. The stock once again spluttered around this zone in June last year and is in a sharp correction since then. The stock declined below its key medium-term support at Rs 423 this month. Subsequent supports are at Rs 360 and Rs 300.

The stock is close to the first support but is not showing any sign of reversal from here.

Investors with long-term perspective can however hold the stock as long as it trades above Rs 300.

But the medium-term is likely to be choppy for this stock and it can face resistance at Rs 420 and Rs 500 in the days ahead. Investors with short-to-medium term perspective should exit the stock on failure to move beyond these resistances.

The area between Rs 600 and Rs 620 will continue to act as a strong long-term resistance over the next couple of years.

SUBEX AZURE : Product revenues fell on a sequential basis :: Kotak Sec,

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SUBEX AZURE LIMITED (SUBEX)

RECOMMENDATION: ACCUMULATE
TARGET PRICE: RS.82
FY12E P/E: 6.9X
Subex's operating performance for 4QFY11 was lower than our
expectations. Product revenues fell by about 7% on a sequential basis.
EBIDTA margins for products division at 31.9% were below expectations.
This was despite the sequential fall in employee expenses from Rs.654mn to
Rs.605mn. The consistent fall in employee expenses continues to surprise us.
The order in-take for the quarter was marginally higher at $.28.3mn ($27mn
QoQ), we believe. Subex has indicated higher confidence in the macro
scene. We need to watch the future pipeline and order book conversions
before we become more optimistic on the future prospects of Subex. The
financial performance of Subex has also been very erratic in the past. We
expect revenues to grow QoQ, leading to higher margins as costs remain
under tight control. We have also assumed full conversion of the
restructured FCCBs and preferential allotment to KBC Aldini Capital
Mauritius of 4mn shares. Our FY12E earnings stand at Rs.9.6 per share. We
maintain ACCUMULATE with a PT of Rs.82 (Rs.88) based on FY12E earnings.
We have assumed FCCBs to be converted into shares (conversion price about
Rs.80, which may increase liquidity in the stock. Uncertainty over the same
may keep the stock range bound. Better visibility and comfort on the future
performance can make us more bullish on the stock.

Accumulate SUBEX AZURE: Target Rs 88: Kotak Securities

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SUBEX AZURE LIMITED (SUBEX)
RECOMMENDATION: ACCUMULATE
TARGET PRICE: RS.88
FY12E P/E: 6.7X
Subex's operating performance for 3QFY11 was a mixed bag. Product
revenues were flat on a QoQ basis and came in below expectations. EBIDTA
margins for products division at 32.7% were above expectations. Interest
cost was higher on a sequential basis, which was surprising. The order intake
for the quarter was 39% higher QoQ at Rs.27mn, we believe and
reflected the management optimism on achieving higher revenue growth.
While Subex indicated higher confidence in the macro scene larger peers in
the industry have indicated still sluggish outlook for the telecom vertical.
We need to watch the future pipeline and order book conversions before we
become more optimistic on the future prospects of Subex. The financial
performance of Subex has also been very erratic in the past. Subex's
employee costs continue to fall, surprisingly. We expect revenues to grow
QoQ, leading to higher margins as costs remain under tight control. We
have also assumed full conversion of the restructured FCCBs and preferential
allotment to promoters of 4mn shares. However, we are surprised at the
decision to dilute equity further at these valuations to repay debt and have
not considered the same in our workings. Our FY11 earnings estimates
stand at Rs.8.8 per share and FY12E at Rs.9.3 per share. We maintain
ACCUMULATE with a PT of Rs.88 (Rs.91) based on FY12E earnings. We have
assumed FCCBs to be converted into shares (conversion price about Rs.80,
which may increase liquidity in the stock). Uncertainty over the same may
keep the stock range bound. Better visibility and comfort on the future
performance can make us more bullish on the stock.