Analysts' corner

Last Updated: Wed, Jan 16, 2013 18:00 hrs

Reco price/date: Rs 2,712/Jan 14;
Current/target price: Rs 3,100/Rs 2,807.25
Analysts are reversing their long-standing bearish view on Infosys. Revival in bread and butter business, flexibility in deals improving win rates, embracing a more realistic margin profile, re-engagement with employees and willingness to reinvest margin gains from a bloated bench are central to their changed investment thesis. These aspects should play out in the backdrop of improving demand health for the sector. Upgrade to Overweight.

J P Morgan

Reco price/date: Rs 40.25/Jan 14;
Current/Target price: Rs 43/Rs 38.35
JPVL’s Q3FY13 results were below expectations (loss of Rs 97.8 crore vs estimated PAT of Rs 95.8 crore) as depreciation and interest expenses at Bina plant are being charged on 70 per cent of the total cost (500 Mw) while revenue is being realised for the 250 Mw Unit-I. Generation was also down 12 per cent year-on-year, due to one-off operational reasons such as maintenance at Karcham Wangtoo (1,000 Mw) and maintenance in a transmission line evacuating power from Vishnuprayag. However, given that Bina Unit-II is expected to commission from March, analysts expect revenue to match costs from Q1FY14. Maintain Overweight.

Barclays Capital Inc

Reco price/date: Rs 255/Nov 14;
Current/Target price: Rs 280/Rs 253.35
Analysts upgrade FY13E and FY14E estimates by six per cent and 11 per cent as they build in higher volume growth in Almond Drops and benefit of gross margin expansion. Their positive view stems from our confidence in (1) the strong brand equity of Almond Drops and its leadership position in the light hair oil market, (2) high growth potential of the light hair oil market; we expect the market to post 18 per cent CAGR over FY2013-15E and (3) high entry barriers in the light hair oil market. Bajaj Corp valuations remain at a discount to (1) other single-product companies such as Colgate Palmolive, GSK Consumer and Jyothy Laboratories and (2) its hair oil peers. Analysts increase their Target Price from Rs 225 earlier and Maintain Buy.

Kotak Institutional Equities Ltd

Reco price/date: Rs 1,331/Jan 11;
Current/Target price: Rs 1,350/Rs 1,371.25
CMC reported Q3FY13 results exceeding analysts/consensus expectation. The revenue growth has been consistently supported by System Integration (cumulative quarterly growth rate of around nine per cent over the last three quarters), while IT-enabled services remained relatively muted in Q3FY13. The margin profile continues to be stable as reiterated by the management. The management is confident of maintaining Ebitda margin in 15-17 per cent range despite rupee appreciation. We expect offshore leverage to kick in from Q1FY14 which will aid margin expansion (Q3FY13 offshore share: 23 per cent of international. The analysts have revised their target price (Rs 1270 earlier). They reiterate Accumulate rating.

Prabhudas Lilladher Research

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