Monday, December 27, 2010

Analyst's corner

TCS, Ashiana Housing, IDFC & Orient Paper & Industries
SI Team / Mumbai December 23, 2010, 0:07 IST

Reco Price: Rs 1,167,
Target Price: NA
Unlike CY10, TCS has witnessed significant discretionary spent commitment at the earlier stage of discussion with its key accounts during customer meets in different geographies. TCS is quite confident of its growth going into 2011-12 as its book to bill ratio continues to improve. With December quarter categorised with lower working days (3 per cent lower than September), volume growth is likely to be impacted for the quarter by similar magnitude. Moreover, the current quarter is likely to bear the impact of stronger rupee as well. Analysts expect margins to decline by 100-120 bps in December quarter, with 7-8 per cent effort-based volume growth. Operating margins are likely to sustain for 2011-12 at 27 per cent as pricing and employee pyramid changes will absorb the salary hikes into next year. Further, declining attrition could impact margins positively.
Maintain buy.

— Edelweiss Securities Limited

Fair value: Rs 220,
Current price: Rs 160.9
Crisil Equities has assigned fundamental grade of 3/5 to Ashiana Housing (Ashiana), indicating good fundamentals. Ashiana has strong track record of developing 9 mn sq ft of residential projects and has a healthy project pipeline of 7 mn sq ft. to be developed over the next four-five years. Ashiana does not accumulate huge land banks, which could result in comparatively lower capital requirements. This along with very low leverage provides Ashiana the strength to withstand cyclical risks. Crisil Equities expects Ashiana’s revenues to grow at a two-year Compound Annual Growth Rate (CAGR) of 40 per cent to Rs 220 crore in 2011-12, while EPS is expected to register growth of 30.7 per cent to Rs 34.3 during the same period.

— Crisil Equities

Reco Price: Rs 171,
Target Price: Rs 210
Natixis Global Asset Management (NGAM), a Paris and Boston based asset manager, will acquire 25 per cent stake in IDFC AMC for Rs 275-crore, valuing IDFC’s mutual fund business at Rs 1,100 crore. This translates into 5.5 per cent of average assets under management of Rs 20,000 crore (September 30). This partnership will enable IDFC AMC to significantly enhance its international distribution. NGAM will be able to expand its global footprint. The valuation ascribed by NGAM is higher than the valuations for the past few deals—T. Rowe-UTI MF (3.3 per cent of AUMs in November 2009), Nomura-LIC MF (2.6 per cent in July 2008) but is in line with analysts’ expectations.
Maintain hold.

— Edelweiss Securities Limited

Reco Price: Rs 55,
Target Price: Rs 80
Orient Paper & Industries’ (OPIL) cement division has recently commissioned 1.6 mn tonne cement capacity expansion (March) and would drive volume growth and 50-Mw CPP would add to energy cost savings. Besides, the worst seems to be over for its paper division with resolution of production-related issues and improved paper price outlook in a rising international pulp price environment. Also, the company’s electrical division is posting robust growth with over 15 per cent volume increase in electrical fan segment and a new stream of revenue from the recently launched CFL. With two of its earnings streams (paper and electricals) on a robust growth phase and its cement business relatively better placed(OPIL) than peers, the company is well placed to tide over the currently challenging phase in the cement space.
Initiate coverage with outperform.

— Indiabulls Researc

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