Stock Views on CROMPTON GREAVES, CANARA BANK, PERSISTENT SYSTEMS

HSBC on PERSISTENT SYSTEMS

HSBC downgrades the rating of Persistent Systems to `Neutral' with a target price of Rs 500. Persistent reported a robust quarter, as dollar revenues grew 5.8% q-o-q, versus. estimate of 5% q-o-q. The positive view on the company remains intact, post Q1. HSBC continues to forecast consensus beating revenue and EBITDA with FY10-12 CAGR of 26.5% and 25%. This growth would be driven by Persistent's unique positioning to benefit from growth/investments in next-generation technologies and its well-established relationships with leading global technology companies, offering higher wallet share. However, EPS CAGR is likely to lag at 10% FY10-12, due to higher tax and equity dilution post the IPO in FY10. The stock is trading at 13x and 12.5x FY11/12E EPS. HSBC continues to value Persistent at 13x FY12E EPS. However, after a strong run-up of 22% in the past month, HSBC expects the stock to remain range-bound and therefore downgrades it to Neutral' as upside from the current price is limited.

BANK OF AMERICA on CANARA BANK

Bank of America maintains `Underperform' rating on Canara Bank with a target price of Rs 450. Canara Bank reported earnings growth of 83% y-o-y driven by very high trading profits. Bank of America has raised the earnings estimates by 11% each for FY11/12, but still expects flat earnings growth in FY11. RoEs are to fall to 19% in FY11 on flat earnings growth y-o-y versus +18/24% earnings growth and RoEs at +22/25% for UNBK/ PNB, both trading at similar multiples to Canara Bank. Canara Bank's loans grew 24% y-o-y driven by corporate and SME business. While CASA (current account savings account) grew a healthy 29% y-o-y, overall deposit growth was strong at 23% y-o-y, thereby CASA was maintained at 29%. Margins are up 30 bps y-o-y (21 bps q-oq) in Q1FY11 as it continues to benefit from lower funding costs.

MACQUARIE  on CROMPTON GREAVES

Macquarie maintains `Outperform' rating on Compton Greaves and increase the target price to Rs 327. CG declared its Q1FY11 numbers, which were ahead of Street estimates, with 19% y-o-y growth in earnings despite sharp euro depreciation. The Street's concerns over the depreciating euro's impact on the company's earnings should now be put to rest, with the company delivering a 19% increase in earnings even with a 6.4% depreciation of the euro against the Indian rupee in Q1FY11. CG delivered strong margin expansion of 160 bps, driven primarily by a reduction in SG&A (selling, general and administrative) expenses, which is sustainable. Macquarie expects revenue growth to pick up in the domestic business in H2FY11, which should drive revenue growth at a consolidated level, even with soft revenue growth in the international business. It increases the target price to Rs 327 from Rs 294 by assigning an 18x multiple to FY12E earnings and 2x to invested equity in Avantha Power. It believes the company is set to surprise on revenue growth in H2FY11 and sustain the same in FY12, setting the stage for an earnings growth of 20% in FY12 and beyond.