Buy Mahindra & Mahindra Financial Services Ltd For Target Rs.1242.00Mahindra & Mahindra Financial Services Ltd (MMFSL), is part of the US $15.9 billion Mahindra Group, and is one of India’s leading Non-Banking Finance Companies with a pan India presence.
During the quarter, the robust growth of Net Profit is increased by 35.71% to Rs. 2162.06 million.
During the quarter, the company has allotted 97,50,257 Equity shares of Rs.10/- each to Qualified Institutional Buyers.
During the quarter, the Company has made an additional investment of Rs.64.86 millions (US$ 1.23 million) in Mahindra Finance USA LLC.
MMFSL continued to broad base its consortium of lenders by bringing in new Banks, Mutual Funds, Insurance Companies and Trusts.
MMFSL currently has a network of 639 offices and Total Assets under Management of Rs.25645 Crores as on 31st December 2012.
MMFSL has got selected in Top 80 Indian Power Brands in the ‘Reigning Tigers’ category.
Net Sales and PAT of the company are expected to grow at a CAGR of 33% and 28% over 2011 to 2014E respectively.
Buy Oberoi Realty For Target Rs.359 Oberoi Realty (OBER) reported 3QFY13 results above our estimates.
* Revenue stood at INR2.9b (v/s est. of INR2.3b), up 53% YoY/11%QoQ. Hotel Westin revenue grew 28% QoQ/7%. Rental (including hotel) stood at INR585m (9MFY13 run-rate of INR1.6b) v/s our FY13E/FY14E estimates of INR2.2b (stable YoY)/INR3.1b.
* EBITDA grew 51% YoY to INR1.7b (v/s est of INR1.4b), while EBITDA margin is up by 1.6pp QoQ to 59.7%. Core EBITDA (ex hotel) improved to 62% v/s 61% in 2QFY13 on account of higher realizations in fresh sales at Exquisite. PAT grew 32% YoY to INR1.3b (v/s est INR1.1b).
* Sales momentum remains stable sequentially at 0.12msf (INR2.2b). Average realizations stood at INR17,451/sf (+2% QoQ, +22% YoY), led by higher realizations in fresh sales at Exquisite. 9MFY13 sales stood at 0.4msf (INR6.5b) v/s our FY13/14 estimates of 0.6/1.1msf (INR10b/16b).
* Despite steady execution progress, customer collections remain weak over past couple of quarters at INR1.6-1.7b v/s INR2.3b in 1QFY13 and earlier. The reason is slowing down of construction linked payments post slab casting.
* We believe, going forward, the key factors to improve cash flow would be fresh launches, and steady construction progress in Esquire.
* The management has started evaluating non-Mumbai land parcels of late, improving the probability of value accretive deployment INR11b of surplus cash.
* So far, OBER has been a strong defensive bet due to high cash surplus and existing annuity assets (~40% of market cap) rendering resilience to downcycle risks. Going forward, deployment of cash in attractive projects and new launches would be the key drivers of stock price. Concern over leasing at nearcompleted commercial projects is another factor to watch out for.
* The stock is currently trading at 13.3x FY14E EPS, 2.1x FY14E BV and ~12% discount our FY15 NAV of INR359. Maintain Buy with TP of INR359.
Buy Wipro For Target 480 Wipro’s Q3FY13 results were touch ahead of PLe/Consensus expectation. However,, uncertain external environment pushed for a weaker-than-expected guidance for Q4FY13. The management has worked towards improving business and client composition, which is resulting in a bumpy ride. We see improving outlook on overall growth prospect of the company in FY14. We reiterate “BUY”, with a revised TP of Rs480 (from Rs440) as we revise our target multiple to 15x (from 16x). (Exhibit: 3)
Q3FY13 in‐line with expectation, but guidance cautious:
Wipro reported another quarter of a weak revenue growth of 2.4% QoQ (TCS: 3.3%, INFO: 4.2%, HCLT: 3.6%), led by realization improvement 3.8% QoQ (Onsite: 3.6%, Offshore: 3.4%). However, volume decline by 1% QoQ is weaker by ~2pp compared to peers. Moreover, the company guided for 0.5% to 3% QoQ growth which accounts for fiscal uncertainity and possible delay in ramp-up. We see high likelihood of Wipro delivering quarter towards the upper end of guidance.
Towards the tailend of restructuring:
Wipro has gone through organizational restructuring over the last eight quarters. The restruturing has been a bumpy ride where it has seen changes at the senior management levels, organizational structure (Service verticalization), S&M investment and tail-trimming of clients. The company is now reaching the end of restructuring process.
Improved client composition and deal pipeline to give stronger CY13:
Management indicated 1.7x stronger deal pipeline in Q3FY13 (v/s Q3FY12). Also, the deal wins have improved on QoQ basis. The company has reduced its nonproductive tail of 80 clients to 20 with 181 new clients’ addition since Q4FY12. We expect improved client composition (due to strong clients’ addition and tail trimming) to result in improved business momentum in FY14.
Valuation & Recommendation – Retain BUY, Revise TP to Rs480:
Management’s cautious tone for Q4FY13 was largely attributed to the uncertain environment. We expect improved deal funnel, client composition and steady deal win to drive volume growth in FY14. We reiterate “BUY” rating, with a revise target price of Rs480, 16x FY14E earnings estimate (5% discount to TCS).
Buy Persistent Systems Ltd For Target Rs. 539.00Persistent Systems Ltd is a global company specializing in software product & technology innovation.
* During the first quarter ended the robust growth in the Net Profit of the company and it is rose by 37.75% to Rs. 446.47 million.
* Persistent Systems has recently inked a partnership agreement with Voltage Security (News - Alert).
* Persistent Systems has been ranked highly in the newly released segments of Cloud and Enterprise Mobility of Zinnov’s Global R&D Service Providers (GSPR) Rating 2012.
* Persistent Systems announces partnership with MA-Based RAGE Frameworks to start business process automation & development services.
* Persistent Systems has entered into a agreement through its US subsidiary to acquire ‘rCloud’, an innovative cloud platform business from privately held Doyenz, Inc.
* Net Sales and PAT of the company are expected to grow at a CAGR of 25% and 13% over 2011 to 2014E respectively.
Outlook and Conclusion
* At the current market price of Rs.477.00, the stock P/E ratio is at 11.18 x FY13E and 9.52 x FY14E respectively.
* Earning per share (EPS) of the company for the earnings for FY13E and FY14E is seen at Rs.42.67 and Rs.50.12 respectively.
* Net Sales and PAT of the company are expected to grow at a CAGR of 25% and 13% over 2011 to 2014E respectively.
* On the basis of EV/EBITDA, the stock trades at 5.51 x for FY13E and 4.51 x for FY14E.
* Price to Book Value of the stock is expected to be at 1.89 x and 1.57 x respectively for FY13E and FY14E.
* We expect that the company surplus scenario is likely to continue for the next years, will keep its growth story in the coming quarters also. We recommend ‘BUY’ in this particular scrip with a target price of Rs.539.00 for Medium to Long term investment.
Buy Mahindra Holidays & Resorts India Ltd.For Target Rs.451We initiate coverage on Mahindra Holidays & Resorts India Ltd (MHRIL) as a BUY with a Price Objective of `451 representing a potential upside of ~37.0% over a period of 15 months. At the CMP of `329, the stock is trading at 23.7x and 19.0x its estimated earnings for FY13 and FY14 respectively. MHRIL is the market leader in the Vacation Ownership (VO) industry and faces limited competition (other sizable player being Sterling Resorts). MHRIL is expected to witness healthy growth of 17.7% CAGR in its top-line to `867.2 crore by FY14 on the back of acceleration in net member additions (13.4% CAGR). We believe that this acceleration is achievable owing to huge untapped opportunity for VO industry in India, adherence to its “Member First” policy and focus towards increasing room inventory (FY13 - ~600 rooms; FY14 - ~425 rooms). While in the recent past, MHRIL was plagued by significant member cancellations, its refurbished business model coupled with increasing room inventory should help in stemming the attrition; boosting net member additions and consequently revenues.
* Robust model with front ended cash flows and steady annuity income streams
Owing to MHRIL’s stable stream of cash flows and self funding nature of the business model, the company has been able to maintain its debt at negligible levels as compared to the hotel industry which has high gearing. MHRIL’s strategy is to fund capex (building room inventory) and customer acquisition costs from membership fees (via both upfront and securitization of receivables). Also, majority of the resort and company level expenses are funded through Resort income and Annual subscription fees (ASF). With an estimated growth of membership base at a 13.4% CAGR, the fund flows, going forward, will ensure that the company maintains debt at negligible levels. Also, the annuity stream in form of ASF will become stronger. Further, we believe that the low gearing status is an added advantage especially during the period of hardships (viz slowdown in membership base, delay in payment of membership fees) as it will be in a good position to raise liquidity from external sources.
* Valuation
We initiate coverage on MHRIL as a BUY with a Price Objective of `451 representing a potential upside of ~37.0% over a period of 15 months. At the CMP of `329, the stock is trading at 23.7x and 19.0x its estimated earnings for FY13 and FY14 respectively. MHRIL is the market leader in the VO industry and faces limited competition (other only organized player being Sterling Resorts). We believe that MHRIL should be able to witness robust uptick in member additions on the back of its revamped growth strategy. The VO industry which is the fastest growing component of the tourism segment in India provides enough room for MHRIL to gain its rightful share.
While the stock has traded at an average PE of 29.0x its one year forward earnings, currently the company is being quoted at its lowest valuations. With the new management team in place coupled with key customer centric initiatives (“Member First” philosophy, inventory additions, value added services), we expect the company’s valuations to re-align to its historical levels. We have valued the company at a PE of 26.0x, which is at a 10% discount to its historical average of 29.0x.
Buy Zee Entertainment Enterprises Ltd. For Target Rs 273Outlook
Zee Entertainment Enterprises Ltd (ZEEL) continued to reported better than expected top-line growth of 33.8%. However, it recorded a decline in margins on account of increased investments (new channel launches – Zee Alwan & Zee Bangla Cinema and sports properties). ZEEL’s market share continues to remain robust led by strong showing of flagship channel Zee TV and stable performance in regional markets. We remain positive on its new ventures i.e. a) launch of HD channels, b) Zee Bangla Cinema (already leading cinema channel in Bengali market, complementing Zee Bangla), c) Zee Alwan, d) Ditto TV and e) ZeeQ (a edutainment channel to be launched in Q3FY13).
Furthermore, expected surge in subscription revenues due to the new digitization reforms, higher than expected ad-revenue growth and enhanced reach from the MediaPro venture should help revenues to grow at a CAGR of ~15.7% to Rs 4,711.3 crore from Rs 3,040.5 crore. At a CMP of Rs 191, ZEEL is trading at 19.1x and 14.1x its estimated earnings for FY14 and FY15 and we reiterate a BUY with the price target of Rs 273 representing a potential upside of ~43%.
Key Takeaways
* ZEEL reported a robust revenue growth of 33.8% YoY to Rs 953.5 crore in Q2FY13 as against Rs 712.8 crore in Q2FY12 with all round performance across major revenue streams i.e. advertising revenues and subscription revenues which grew by 33.7% YoY (Rs 528.1 crore v/s Rs 394.9 crore) and 35.7% YoY (Rs 394.9 crore v/s Rs 291 crore) respectively.
* During the quarter, advertising revenues grew sharply by 33.7% at Rs 528.1 crore despite seasonally weak advertising quarter. The ad-revenue growth was primarily driven by (a) India-Sri Lanka series and (b) ~18% advertising growth from ex-sports business (led by flagship channel Zee TV).
* Subscription revenues recorded 35.7% YoY growth to Rs 394.9 crore in Q3FY13 as against Rs 291 crore primarily driven by domestic subscription revenues. Domestic revenue grew by 43.9% YoY to Rs 280.8 crore on the back of continued traction from MediaPro and International subscription revenue grew by 19.0% YoY to Rs 114.1 crore largely due to rupee depreciation.
Buy Time Technoplast Ltd. For Target Rs.53 Outlook on revenue growth is positive as recently commissioned overseas plants get ramped up.
* EBITDA margins expected to remain stable. Main feedstock (HDPE) price has been trading in a narrow range. Moreover, there is a mechanism in place to compensate for price fluctuation.
* Company can generate revenue of Rs.28-29 bn from existing capacity. Going ahead, capex to moderate and would be largely confined to maintenance related work. This should boost free cash generation.
* We reiterate BUY on the stock with a revised price target of Rs 53 (Rs 55 earlier)
Valuations and recommendation: Maintain Accumulate on account
of sluggish near-term earnings growth
* We project earnings to grow 27% CAGR between FY12-FY14 as the company's manufacturing units get ramped up.
* At CMP, TTL is trading at P/E of 8.7x and 6.6x FY13 and FY14 earnings respectively.
* We reiterate a BUY on the company with a DCF based target price of Rs 53 (Rs 55 earlier).
No comments:
Post a Comment