Stock views on Mphasis, Reliance Industries, GVK Power & Infrastructure

IIFL on GVK Power - Target Rs 23.9

IIFL has recommended a buy rating on GVK Power & Infrastructure with target price of Rs 23.9 in research report.

"The government has approved levy of a development fee (ADF) at Mumbai airport on an ad-hoc basis for a period of 48 months. The ADF considerably eases the fund crunch faced by the Mumbai airport and obviates the need for JV partners of Mumbai International Airport Limited (MIAL) to bring in additional equity. This is a major relief. Continuity of the ADF is contingent on review of land deals after six months. The levy adds Rs 3 per share to GVK’s SoTP as the government order has allowed real estate monetisation till Rs 10 billion before the levy is reviewed. Our assumptions of real estate monetisation in the initial phase are lower than the ceiling. Adjusting for a Re 1 per share potential hit due to VRS liability, we reckon there is an upside of 10% to GVK’s SOTP, Buy, target of Rs 23.9," says IIFL's research report.

Emkay Global on Mphasis - Target Rs 240

Emkay Global Financial Services has maintained its buy rating on Mphasis with a price target of Rs 240 in its research report.

"Mphasis reported superlative Q1FY09 results with revenues at Rs 9777 million (+9.3% QoQ, + 58.1% YoY) and operating profits (EBIT) at Rs 2106 million (+24.4% QoQ, +246.6% YoY). Operating margins remained steady at October month levels at 26.5%. Net profits at Rs 2100 million (+14.7% QoQ, +271.1% YoY) beat estimates boosted further by lower tax rates. Net employee addition remained in line at 1,193 (with apps HC up by 638 employees sequentially). Our confidence on Mphasis as the best demand story in the mid cap IT services space continues to get reinforced with enviable performance over the past 3 quarters now.

Our view gets vindicated with Mphasis being the 2nd best out performer in the IT services universe over the last 12 months (Mphasis has outperformed broader markets by 45%, next only to Infy on a LTM basis, refer section below). Although we increase our FY09 earnings estimates by 25% currently, we will review them shortly post discussions with co management as we believe there is significant upgrade to current estimates. Maintain BUY with a price target of Rs 240," says Emkay Global Financial Services' research report.

CLSA on RIL - Target Rs 1550

Following the Reliance Industries (RIL) and Reliance Petroleum (RPL) merger, CLSA (Credit Lyonnais Securities Asia) has said they will keep a buy on RIL post swap ratio and that they have a target of Rs 1,550 per share. The firm also said that RPL merger will not change RIL EBITDA profile.

The broking firm sees a free cash flow of USD 4.5–5 billion for RIL over the next two years while it sees 0.4–1.4% EPS accretion for RIL post the RPL merger.

Stock views on Tata Power, ICICI Bank, Siemens India,

MERILL Lynch on RELIANCE INDUSTRIES

MERILL Lynch has cut its price objective on Reliance Industries (RIL) by 15% from Rs 1,825 to Rs 1,555 based on sum of the parts valuation. However, it continues to retain its ‘buy’ on the stock. The brokerage says that the cut is due to cut in the value of its refining business and value of its investment in RPL. The former has been cut by 56% to Rs 168 per share and the latter by 39% to Rs 137 per share. “We have steeply cut Singapore complex refining margins forecast for financial year (FY) 2010 and 2011 (expected). Consequently, refining margins of Reliance Industries (RIL) and refining subsidiary Reliance Petroleum (RPL), too, have been steeply cut,” the report said. The cut is relatively modest assuming a weaker rupee, it adds. RIL’s presence in E&P and petrochemicals also helped dilute impact of refining margin cut on RIL. The report says that the key risks include failure in the retail business, and changes in government policies like withdrawal of the tax holiday which may have a direct impact on the business, cash flow and profit, among other things.


Enam Securities on SIEMENS INDIA

Enam Securities has put an ‘underperformer’ on Siemens India on lower-than-expected results and poor performance by its subsidiaries. The brokerage says that Siemens’ continuing engineering businesses — power, industry and transportation are showing signs of slowing. The IT business is unlikely to create value for the shareholders. “We are revising our earnings estimates downward by 31% to Rs 18.5 to account for slowing business traction. We downgrade the stock to sector underperformer,” the report says. It adds that the management of the company has hinted at delays in contract finalisation and contract renegotiations at lower prices by customers due to the decline in commodity prices. The management believes that the power division will be a key growth driver, driven by strong growth in domestic market and huge opportunity in the Middle East. “Going forward, the management would be focusing on the quality and profitability of order rather than size and volume of the project,” says the report.


BNP Paribas Securities on ICICI BANK


BNP Paribas Securities has maintained its ‘buy’ rating on ICICI Banks on account of bank’s strategy of consciously slowing down on growth in riskier categories. The brokerage house says, “Our analysis of incremental advances — broken into mortgage, non-collateralised retail and corporate loans — vis-`-vis the incremental gross nonperforming loans (NPLs) additions indicates that bank’s strategy of consciously slowing down on growth in riskier categories has started yielding results.” It expects a slowdown in rate of growth of non-collateralised NPLs over the next two quarters, although in absolute terms, incremental NPLs will continue in the Rs 3-4-billion-perquarter range as at present. The brokerage says that the bank trades at one time its financial year 2010 (expected) book value at its target price of Rs 620. “We use a three-stage residual income valuation to arrive at our core bank target price of Rs 475 and a sum-of-the-parts approach to arrive at Rs 145 per share for subsidiaries. Our aggregate target price for ICICI Bank is Rs 620.”


Indiabulls on TATA POWER


Indiabulls has upgraded its rating on private power sector major Tata Power from ‘hold’ to ‘buy’. The brokerage is upbeat about the company’s future on the back of its upcoming projects. It believes that the existing power generation and distribution businesses and stable revenue-generating subsidiaries provide stability to the company. “Based on our SOTP valuation, we have arrived at a target price of Rs 872. It says that stock price has corrected sharply since our last quarterly report, and it is undervalued at the current market price. It, however, adds that the company may find it difficult to finance its other expansion plans. But due to its experienced management team, it is expected to tide over the current crisis. It adds that any delay in completion of the Maithon and Mundra power projects would adversely affect company’s rating