Analysts' corner

Last Updated: Tue, Mar 05, 2013 06:11 hrs

Reco price/date: Rs 380/March 4
Current/target price: Rs 379/Rs 390
Mphasis' revenue in the quarter ended December declined four per cent quarter-on-quarter, primarily due to a 10 per cent fall for top client HP. Earnings before interest and tax (Ebit) margins fell 204 basis points quarter-on-quarter to 15.5 per cent. The growth in revenue is likely to lag those of its peers, given the likely decline in HP revenues through the next two to three quarters. The company's management has reiterated its focus on growing the non-HP business 1.5 times the industry levels. Analysts believe the Ebit margins have peaked and these are likely to decline 100 basis points in FY13. The consolidation of digital risk would also weigh on the margins, given the business' low margin profile (10 per cent Ebit). Antique has cut its FY13 and FY14 earnings estimate by 11-12 per cent. Maintain 'Hold'.

Antique Stock Broking

Reco price/date: Rs 277/March 4
Current/target price: Rs 289/Rs 343
Analysts believe Amara Raja Batteries Ltd (ARBL) is structurally well placed to reap long-term benefits in the battery space, as the company has developed a strong brand for its products, leading to gains in market share from Exide Industries and the unorganised segment. Through the past few quarters, ARBL has outperformed Exide Industries on the revenue, margins and earnings fronts, leading to a re-rating of its stock. Analysts expect ARBL to report stable earnings before interest, tax, depreciation and amortisation margins of 15.4-15.6 per cent through FY13-FY15, posting double-digit compounded annual growth rates of 20 and 15 per cent in sales and earnings, respectively. 'Buy'.
Nirmal Bang Institutional Equities

Reco price/date: Rs 206/March 4
Current/target price: Rs 209/Rs 325
Ashoka Buildcon Ltd's (ABL) lifecycle road development experience, financial discipline and consortium bidding strategy make it a strong developer. SBI-Macquarie's fund infusion of Rs 700 crore (valuing ABL's equity in Ashoka Concessions at 1.4-1.6 times) not only provides much-needed capital for generating value from recent project wins; it also enhances its capabilities/net worth. Industrial and mining activities are the traffic drivers for its portfolio, 55-60 per cent of which passes through India's most mineral-rich zone. As 75 per cent of this portfolio would become operational by FY14-end, analysts expect a compounded annual growth rate of 49 per cent in cash flow through FY13-16. 'Initiate Coverage with Buy'.
Ambit Capital

Reco price/date: Rs 8/March 4
Current/target price: Rs 9/NA
According to the media, S Kumars Nationwide Ltd (SKNL) plans to raise about Rs 600 crore by selling shares of subsidiary Reid & Taylor through a qualified institutional placement. The funds raised would be used to repay the company's debt. In 2010, SKNL had planned to list its Reid and Taylor business. However, due to unfavourable market conditions, this didn't materialise. According to the media report, as of now, the promoters don't have plans of an initial public offering, as market conditions haven't improved substantially. Also, the SKNL stock hasn't performed well. 'Neutral'.
Angel Broking

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