Stock Views on FUTURE CAP HOLDINGS, HCL INFOSYSTEMS

EDELWEISS on FUTURE CAP HOLDINGS

EDELWEISS has initiated coverage on Future Capital Holdings with an ‘accumulate’ rating as it feels that the company with its vertically-integrated model is likely to capture value across the chain in the high-growth consumption space. “The company is building a vertically integrated capital-cum-agency business model through its investment advisory, financing and financial products distribution businesses,” says the report. The company is a focused investment advisor with $1.5 billion funds under advice in consumption-related sectors, it adds. The brokerage expects its assets under management to grow to $5 billion by FY11E. It also expects the “company’s net revenues to grow seven-fold to Rs 7.7 billion in FY10E and profit after tax to grow to Rs 1.8 billion in FY10E”. The stock is trading at 12.6 times FY10E earnings and 2.5 times FY10E book, says the report. Edelweiss recommends investors to accumulate the stock at current levels from a long-term perspective (2-3 years).

CLSA on HCL INFOSYSTEMS - TARGET PRICE: RS 155

CLSA has maintained an ‘outperform’rating on HCL Infosystems while lowering the target price from Rs 230 to Rs 155 due to the further slowing down of PC sales. “HCL Infosystems’ sales are slowing down further and we now expect flat to negative year-on-year revenue growth in the segment in the June’08 quarter,” says the brokerage. About 30% of the company’s PC sales go to the retail segment, where the slowdown observed since late CY2007 has deepened, it says. Lower computer systems revenue assumptions are driving around 4-11% further cut in EPS estimates for FY08-10, it goes on to add. According to CLSA, the demand of PC seems to be waning due to “cost-led 5-7% price hikes passed on by vendors, plus the lower financing options available (higher interest rates plus cut back in new loans from financiers)”.