Motilal Oswal views on TCS, Marico, United Spirits

TCS - Target Rs 760

Motilal Oswal has maintained its buy rating on Tata Consultancy Services (TCS) with a target of Rs 760 in its October 22, 2008 research report. "TCS reported USD revenue growth of 3.2% QoQ and 11.2% YoY at USD 1574 m (v/s our est. of USD 1,600 million). PAT at Rs 12.6 billion grew 1.4% QoQ (1.2% YoY), significantly below our estimates (Rs 14.1 billion) due to forex losses of Rs 2.6 billion. We are revising our FY10 USD revenue growth estimates downward by 470bp from 19% to 14.3%, on account of client specific issues with respect to TCS and overall demand uncertainty."

"Our FY09 EPS stands revised to Rs 58.1 from Rs 60.4 while we have lowered our FY10 EPS to Rs 63.3 from Rs 69.1. We are assuming an average rate of Rs 45.2/USD for FY09 and Rs44/USD for FY10 against our earlier estimate of Rs 43/USD for FY09 and Rs 42/USD for FY10. We expect FY08-FY10 revenue CAGR of 19% and EPS CAGR of 11%. The stock is trading at 8.6x FY10E earnings. We revise our target price to Rs 760 (12x FY10 EPS), implying 39% upside. Maintain Buy," says Motilal Oswal's research report.

Marico - Target Rs 65

Motilal Oswal has maintained its buy rating on Marico with a target of Rs 65 in its October 22, 2008 research report. "Marico posted in-line net sales of Rs 6 billion, a growth of 30% YoY. Adjusted net profit grew 11.6% YoY to Rs 471 million against our estimate of Rs 495 million."
"The management has given a cautious outlook on volume growth for 3QFY09. Prices of copra are likely to retreat in line with other edible oils in the coming weeks, which would be margin accretive for Marico. We expect adjusted PAT growth to remain under pressure in FY09 (16.5%); margin expansion of 90bp would result in 20% PAT growth in FY10. The stock is trading at 17.7x FY09E EPS of Rs 3 and 14.9x FY10E EPS of Rs 3 .6. We maintain Buy, target of Rs 65," says Motilal Oswal's research report.

United Spirits - Target Rs 1351

Motilal Oswal has maintained its buy rating on United Spirits with a target of Rs 1351 in its October 22, 2008 research report. "Revenues at Rs 9 billion (est. of Rs 9.2 billion) were up 20%. PAT at Rs 939 million (est. of Rs 1.05 billion) was up 17%. Gross margin declined 610bp due to sharp increase in raw material and packaging cost. EBIDTA margin improved 20bp due to sharp decline in advertising spend (down 340bp) and staff cost (down 240bp). EBIDTA is Rs 1.8 billion v/s est. of Rs 1.9 billion, up 21% YoY."

"We believe the growth story in United Spirits is intact. Volumes are expected to grow at 12% CAGR in the long term and the outlook from the regulatory changes continues to be positive. We are downgrading FY09 and FY10 EPS (excluding treasury stock) estimates from Rs 56.6 and Rs 77.6 to Rs 47.6 and Rs 67.6. The stock is trading at 16.3x FY09 EPS of Rs 47.6 and 11.5x FY10 EPS of Rs 67.6. Maintain Buy,target of Rs 1351" says Motilal Oswal's research report.