Stock views on KEC International, Wipro, Infosys

Angel Broking on KEC International - Target Rs 477

Angel Broking has recommended a buy rating on KEC International with a price target of Rs 477 in its research report.

"KEC International (KEC) is a global player in the Power Transmission and Distribution (T&D) network. KEC, which recently enjoyed a good inflow of domestic orders primarily from Power Grid Corporation (PGCIL), is well poised to bag more orders from the domestic markets. Further, KEC derives close to 63% of its revenue from its overseas operations and is expected to clock good growth in this space as well. Thus, KEC is set on a high growth path on the back of healthy order book position, stable Margins (registered in spite of a volatile commodity and currency markets) and diversification into the Railways and Telecom Segments, where the government is set make substantial investments. At Rs 373, the stock is trading at 10.2x FY2010E and 7.8x FY2011E Earnings. We initiate coverage on the stock with a buy recommendation and target price of Rs 477,” says Angel Broking's research report.

PINC Research on Wipro - Target Rs 420

PINC Research has recommended a buy rating on Wipro, with price target of Rs 420, in its report.

"We upgrade our estimates on Wipro from HOLD to BUY recommendation with a target price of Rs 420, an upside of 11%. The stability in pricing in these challenging environment has helped the company to gain a competitive edge over its peers. They are also eyeing the emerging markets for the much needed volume growth. The management believes that the number of ramp downs in projects have seen a significant decline which are positive signs for posting a single digit growth in FY10," says PINC's research report.

PINC Research Infosys - Target Rs 1950

PINC Research has upgraded its rating on Infosys Technologies from sell to buy, with price target of Rs 1950, in its report.

"We upgrade our rating on Infosys from 'SELL' to 'BUY' with a target price of Rs 1,950, an upside of 12%. We believe that the worst is over for USA, which accounts for 60% of the revenues for the major Indian IT vendors. The signs of recovery will help Infosys to post muted single digit growth in terms of revenues. The management also believes that things are improving from their clients’ end which will provide them the much needed volume growth," says PINC's research report.

Stock views on KEC International, AIA Engineering, City Union Bank

Sushil Finance on City Union Bk, target of Rs 32
Key strengths of the Bank are high margins of +3.0%, one of the lowest opex ratio of 38%,well-capitalized with CAR of 12.5% (supported by very high percentage of Tier-I capital of +10%), High CD Ratio of 69%, strong business growth of +30% over FY07-09, Low AFS portfolio of around 20% and high sustainable ROE of 19% supported by high ROA of 1.4%. Key weakness is very low CASA of 19% and lower NPA coverage ratio of 40%. The stock is currently trading at 1.1x FY10E ABV and 5.3x FY10E Earnings with a sustainable ROE of 19%, Buy, " says Sushil Finance's research report.
Sushil Finance on AIA Engineering; target of Rs 315

AIA has a manufacturing capacity of 165,000 TPA and it had plans to expand another 100,000 TPA capacity, preferably a SEZ, to manufacture high chrome mill internals. AIA would be benefited by both replacement and capex led demand in cement, mining and power utilities across the domestic and international markets. AIA generates 75% of its revenues from replacement demand. At CMP of Rs 240, the stock is available at 11.3x its FY11E EPS of Rs. 21.2 & 2.1x its FY11E ABV. 'Buy' with a target price of Rs 315," says Sushil Finance's research report

Angel Broking on KEC International, target of Rs 477

KEC International (KEC) is a global player in the Power Transmission and Distribution (T&D) network. KEC, which recently enjoyed a good inflow of domestic orders primarily from Power Grid Corporation (PGCIL), is well poised to bag more orders from the domestic markets. Further, KEC derives close to 63% of its revenue from its overseas operations and is expected to clock good growth in this space as well. Thus, KEC is set on a high growth path on the back of healthy order book position, stable Margins (registered in spite of a volatile commodity and currency markets) and diversification into the Railways and Telecom Segments, where the government is set make substantial investments. At Rs 373, the stock is trading at 10.2x FY2010E and 7.8x FY2011E Earnings. We initiate coverage on the stock with a buy recommendation and target price of Rs 477,” says Angel Broking's research report.

Stock views on AIA Engineering, Mcnally Bharat Engineering, KEC International

SKP Securities on Mcnally Bharat Engineering - Target of Rs 103

SKP Securities has maintained its buy rating on Mcnally Bharat Engineering with a target price of Rs 103 in its research report.

"With an order book of Rs 2200 crore which is 2xFY09 revenues and bidding for Rs 4075 crore worth of orders we feel the company is poised to manage healthy growth rates over the next 2-3 years. Though managing the debt component will be a challenge for the compnay we believe falling raw material prices and low interest rates will aid the company in managing its debt prudently. We feel the company will be able to manage to grow at CAGR of 30-35% over the next 24 months on the basis of current order book and expected orders. We maintain a buy on the company with a target price to Rs 103/- in 15 months implying a p/e multiple of 8x FY10 earnings," says SKP Securities' research report.

FinQuest Securities on KEC International - Target of Rs 368

FinQuest Securities has recommended a buy rating on KEC International with a price target of Rs 368, in its report.

"KEC plans to expand its Railway business by entering into areas like tracking, signaling and railway platforms. We expect KEC to report an EPS of Rs 37.7 and Rs 46.3 for FY10 and FY11 respectively. Given the strong pipeline of orders, and earnings growth visibility over the next two years, we believe valuations are attractive. It is currently trading at 6.3x its FY11 EPS. We initiate coverage with a buy rating on the stock with a target price of Rs 368," says FinQuest Securities' report.

Sunidhi Securities on AIA Engineering - Target of Rs 235

Sunidhi Securities & Finance has recommended a buy rating on AIA Engineering with a price target of Rs 235, in its report.

"Although there has been some slowdown witnessed due to global factors, with the Asian hunger for metals growing, mining activity too is expected to go up. Companies have increased their exploration budgets and fresh capacities are coming up in sectors such as steel, aluminum and copper. AIAEL also expects to enter the mining segment where the market potential is 10 times bigger than cement. At the CMP of Rs 190, the share is trading at a P/E of 10.2 on FY09E and 8.4 on FY10E. We recommend buy with a target of Rs 235 in the medium term," says Sunidhi Securities & Finance's research report.

Stock views on Suzlon Energy, KEC International, Mphasis

Anagram Research on Suzlon Energy - Target of Rs 60
Anagram Research has recommended a buy rating on Suzlon Energy with a target price of Rs 60 in its research report.

"In the last 2 years, Suzlon has traded in the range of 16 to 65 times its earnings. Whereas Vestas and Gamesa have traded in the range of 25 to 73 and 24 to 42 respectively. Historically the companies in the wind energy market have traded at high P/E levels primarily due to expected high growth of the industry. Furthermore the recent decline in the stock price of Suzlon presents an excellent opportunity for investment in the company."

"We believe Suzlon will continue to command high P/E on account of better growth prospects, well placed among peers & due to planned backward integration leading to higher margins in the future. We believe most of the bad news has already been factored in the stock price. While the long term story for the Wind Energy sector is intact and Suzlon has done well to survive amongst adversity. We recommend BUY rating on the stock with a target price of Rs 60 in 12 month period," says Anagram's research report.


Bonanza on KEC International - Target of Rs 147

Bonanza has recommended investors to buy KEC International on dips near 105-110 levels, for a target of Rs 147 in its research report.

"A RPG group company KEC is leading tower & transmission line EPC contractor. The Power sector is its main customer. It has order book of Rs 5000 crore, out of which over 70% is from overseas. It is executing orders in 15 countries presently. Given the visibility in earnings the scrip looks a good mid-term investment pick. At CMP, it trades at about 5.5 PE based on FY 09 Estimated EPS of Rs.21.7. Investors can buy on dips near 105-110 levels i.e. 5X PE, for a target of Rs 147 i.e. at PE multiple of 7," says Bonanza's research report.


Emkay Global on Mphasis - Target of 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’s strong parentage of HP-EDS has helped it sustain high growth rates in the recent past and we believe that would continue to provide strong support in a tough demand environment. We highlight that Mphasis’s ITO business’s growth is driven by restructuring of EDS’s existing ITO contracts as the new contracts incorporate significant offshore ramp up in Infrastructure outsourcing."

"We highlight that the erstwhile EDS management (prior to the HP takeover) had categorically attributed its improved success rate in new deal wins/renewals to Mphasis’s offshore strength and had indicated that those deals had a substantial offshore component. We believe Mphasis remains the ‘Best Demand’ story in a tough macro environment helped by it’s strong HP-EDS parentage. Maintain BUY with a price target of Rs 240," says Emkay Global Financial Services' research report.

Stock views on KEC International, Nagarjuna Construction, Gujarat State Petronet

LKP Shares on Gujarat State Petronet - Target Rs 42

LKP Shares has recommended a buy rating on Gujarat State Petronet (GSPL) with a price target of Rs 42 in its research report.

"GSPL reported net sales of Rs 110.6 crore, up 6.2% year on year (YoY). Its operating profit of Rs 101.6 crore was up by 4.6% YoY," LKP said in its report.

"Higher staff and O&M expenses reduced the profit margin by 128 bps. Net profit growth of 10% YoY for Q309 was driven by good realizations, a growth of 51% YoY. Fixed capacity utilization charges — take-or-pay clause — were triggered on some of the contracts in this quarter, which led to increase in realizations."

"As per the priority set out by the new gas utilization policy, other sectors have been listed out prior to Refineries in the order of gas supply. This, we believe, shall lead to further delay of gas flowing from GSPL’s network to RIL’s refinery at Jamnagar to Q3’10. Also, many contracts are renewed at the higher tariff price starting January 1’09, which shall bolster the revenue earnings of the company. We recommend a BUY on the stock with a price target of Rs 42 for a medium term horizon," the research report said.


Angel Broking on Nagarjuna Construction - Target Rs 96


Angel Broking has maintained its buy rating on Nagarjuna Construction Co. with a target price of Rs 96 in its research report.

"The Government of Andhra Pradesh has cancelled order worth Rs 1,000 crore awarded to Nagarjuna Construction Company (NCC). The cancelled order was for Andhra Pradesh International Centre project, a multi-utility complex at the AP Bhavan premises in New Delhi and was proposed to be taken up through the PPP mode on a Build-Operate-Transfer basis. The work order scope envisaged to set up an international convention centre, guesthouse, residential quarters, hostel and dormitory facilities for government use, and service apartments on 19.84 acres at AP Bhavan. The order was canceled citing failure to execute the development agreement (DA) as well as licence agreement (LA) even after expiry of the 75-day deadline. NCC consortium also failed to submit performance security of Rs 100 crore before the execution of DA and LA."


"The consortium was also required to pay Rs 25 crore towards project development expenses but had paid only Rs 5 crore even after timeline extension by 60 days. As per the order agreement the developer was required to pay an annual minimum guarantee amount of Rs 45 crore during the first 10 years from commercial operation, Rs 60 crore during the next 10 years and Rs 75 crore during the last 10 years of the 30-year licence period. The order cancellation takes the outstanding order book of NCC to Rs 12,131crore which is 3.5x its FY2008 revenues. We maintain a Buy on the stock with a target price of Rs 96," says Angel Broking's research report.

IIFL on KEC International - Target Rs 160

IIFL has recommended an add rating on KEC International with a price target of Rs 160 in its research report.

"In our recent meeting with KEC International, management said it expects the company to achieve stable revenue growth in FY10 on the back of the current order book and likely order inflows from Middle East and Africa. However, increasing competition-especially in the domestic market-could play spoilsport for both new project wins and EBITDA margins. We estimate FY10-11 EBITDA margins at 9%, against management expectation of 10%."

"The company would continue to have forex gains/losses on mobilisation advances for international projects, as these are not hedged. Management hinted at a possible change in accounting policy for amortisation of reserves created due to the merger of RPG Transmission and NITEL in FY08. This change would result in 9M FY09 profits being lower by Rs 90 million. We incorporate this accounting change in our current estimates resulting FY09-10ii earnings estimates being lower by 8%. Add, price target of Rs 160," says IIFL's research report.

Stock views on KEC International, Thermax, Info Edge, IVRCL Infrastructure, DLF

HSBC on KEC International

HSBC maintains its `underweight’ rating on KEC International with a target price of Rs 130. The company has reported sales growth of 25% y-o-y to Rs 870 crore in the quarter. EBITDA margin was lower by 625 bps at 8.2% due to forex losses of Rs 16.6 crore and high raw material cost. The company also reported 67% y-o-y increase in interest cost due to debt raised for capex and working capital. Due to working capital and capex requirements, KEC has increased debt to Rs 900 crore while depreciation is lower because part of its assets have been transferred to the books of developers and new assets will be capitalised in FY10E. The stock is trading at FY10E PE multiple of 4.4x and PB of 1x. This compares with peer Jyoti Structures trading at 4.1x/1x and Kalpataru Power trading at 3.8x/0.7x. KEC has higher gearing and lower return ratios, which makes it more expensive than peers. The target price of Rs 130 is the mid-point of a PE fair value of Rs 125 and a PB fair value of Rs 135.


Citigroup on Thermax


Thermax’s revenues declined by 6% y-o-y, led by a decline of 9% y-o-y in the energy segment. Environment segment grew by 14% y-o-y. Margins (adjusted for forex loss) have improved by 137 bps, driven by cost-cutting initiatives. Order book of Rs 4,100 crore is up 40% y-o-y; however, the pace of order book growth has moderated. Management suggested there is “substantial resistance” from clients to finalise orders, especially large-size projects. Some clients have cancelled/slowed execution. According to Thermax, cement and metals sectors’ capex is expected to slow down while the power sector will continue to invest, albeit at a lower level than before. But there are some positives -
1) While risks to order inflows remain, increased power sector exposure should help provide some support to growth.
2) Management has been ahead of the curve and seems geared to handle the downturn; ~293 bps margin improvement for 9MFY09 is commendable, especially since it was against the backdrop of rising input costs and no pass through clauses.
3) The company has no debt and one of the highest RoEs in the sector. Citigroup cuts the target price to Rs 211 from Rs 480 based on 8x FY10E (15x Dec09E earlier). Historically, Thermax has traded on par with BHEL, but in the recent past, has been trading at a widening discount.


CLSA on Info Edge

Revenue growth in Info Edge’s flagship recruitment solutions is down to 1.5% y-o-y from 30%+ at the start of the year as the slump in hiring across all industries has taken its toll. With the customary March quarter budget flush unlikely to happen this year, March 2009 outlook for Naukri looks even weaker. Meanwhile, Info Edge’s realty business continues to face headwinds from the slowing real estate market. A course correction in the matrimony space with establishment of brick and mortar Jeevansathi centres is still in the investment phase and any positive surprises on this front are unlikely in the near term. With over Rs 330 crore of cash and continued leadership of Naukri, Info Edge remains better positioned compared to competitors in a difficult environment. With the slowdown becoming homogeneous, online traffic from recruiters has gone down significantly and recruitment solutions grew only 1.5% y-o-y in the December 2008 quarter. Info Edge’s leadership position in the online recruitment segment and Rs 330 crore of cash pile should help it encounter the economic downturn better than competitors. Also, new initiatives in education and professional networking have long-term potential. However, Info Edge’s valuations (21.5x March 2009) cannot be defended with a 2.3% FY09-11CL EPS CAGR. With visibility for even March 2009 severely constrained, risk to FY10 earnings is high.


Maquarie on IVRCL Infrastructure

IVRCL reported a 22% topline growth but decline in PAT in 3Q09 results. Company reported 22% revenue growth thus translating into strong 39% y-o-y growth for 9MFY09. However, margins came in significantly lower by 230 points in the quarter and have now declined by 100 bps y-o-y in 9MFY09 driven by a higher mix of lower margin projects. PAT declined significantly by 27% y-o-y in the quarter driven partly by margins and partly by very high interest costs of Rs 41.9 crore versus Rs 17.7 crore last year. For 9MFY09, PAT growth has come in at 7% versus our expectations of 4% growth for full year. Interest expense grew to Rs 41.9 crore in the quarter, highest ever for IVRCL, given that debt levels have increased to Rs 1500 crore, resulting in net debt/equity ratio of around 0.8x, which is on the higher side. IVRCL has an order book of Rs1,4300 crore at the end of 3Q09 which provides strong revenue visibility of 3-4 years, highest in the mid-cap construction space. The company has received robust order inflows of Rs 6600 crore in 9MFY09 (+100% y-o-y). Maquarie estimates are at the lowend of the management’s guidance with a 35% topline growth in FY09 and a lower net income growth of 4% due to interest cost pressures.


Morgan Stanley on DLF


Morgan Stanley maintains `underweight’ rating on DLF in view of an extremely weak physical property market, modest stock of on-going projects and, now, prospects of slow improvement in balance sheet (in view of the sharp fall in internal accruals). DLF’s construction starts across biz verticals in F9M09 total upto just 5-6 msf, which is a leading indicator of poor earnings trajectory ahead. Management believes that the current business environment is fluid and uncertain, and therefore, it targets to conserve capital and customize products to suit ongoing economic slowdown. Near term mid-income housing and scale up in rentals will be the areas of focus, whereas, luxury housing and commercial complexes will be slowed. To weather the current credit squeeze, DLF targets to change the maturity profile of its debt portfolio to long term by mid-2009, such that there will be no re-payment obligation for 24-36 months. Out of Rs14800 crore debt, Rs 9000 crore is already long term, with commitments for another Rs 3000 crore.. DLF will restrict its sales to DAL to 12 msf (million square feet), of which 9.5 msf will be completed shortly. It targets to raise roughly $450 million PE capital to part fund the pending receivable (Rs 5400 crore). Valuations don’t appear inexpensive at roughly 1.1x F09 P/B with increasingly slower pace of value unlocking in the land bank. Stock is at a 40% discount to the F09NAV

SMC Institutional Research Views on Smallcap Power Stocks - KEC International, Gujarat Industies Power

KEC International
KEC is a RPG group company involved in power transmission, engineering, procurement and construction. The company has reported 28% CAGR growth in revenue for last three years. We believe the aggressive investment plans of government would benefit transmission companies including KEC.

Gujarat Industies Power
Gujarat Industries Power Company (GIPCL) has a huge lignite reserves and also multiple fuel sources. It has reported 6% CAGR growth in revenue for last five years. We believe company will continue to enjoy ROE of 9% and fundamental EPS growth rate of 12%. We expect the top and bottom line to grow at a CAGR of 6% and 11% respectively over FY08-11.