Buy Unity Infraprojects Ltd For Target Rs.61



We recently met with the management of Unity Infraprojects Ltd to get an insight about order inflow scenario in the infrastructure sector as well as outlook on the company. Order inflow continues to remain lower than management's expectations mainly led by delays in finalization of awards due to administrative hassles and clearances. Company is L1 in Rs 5-6 bn worth of projects across roads, building and water segment and expects to get an inflow of Rs 25-30 bn for FY13. Though order inflow has slowed down across the entire sector, we continue to maintain BUY on Unity Infraprojects mainly due to its extremely low valuations. Stock mayunderperform in near term due to lower order inflows but decline in interest rates going forward would be positive for the company in medium to long term.
Valuation and recommendation
* At current price of Rs 43, stock is trading at extremely low valuations of 3.0x and 2.8x P/E on FY13 and FY14 respectively.
* We maintain our price target of Rs 61 based on 4x FY14 estimated earnings.
* Though order inflow has slowed down across the entire sector, we continue to maintain BUY on Unity Infraprojects mainly due to its low valuations. Company is also expected to benefit from decline in the interest rates going forward.
Buy Shalimar Paints Ltd For Target Rs.153.00



Shalimar Paints Ltd has wide range of products in Decorative, Architectural & Industrial segments & also in Architectural Coatings covers both Interior & Exterior segments.
* During the Second quarter ended, the robust growth in the Net Profit of the company and it is rose by 23.75% to Rs. 46.90 million.
* The Company has posted net sales of Rs. 1437.80 million for the quarter ended December 31, 2012 as compared to Rs. 1254.30 million for the quarter ended December 31, 2011.
* Shalimar introducing the Thermal barrier coatings for the purpose of buildings.
* Shalimar approved sub division of the existing equity shares of the face value of Rs.10/- each into 5 equity shares of the face value of  Rs.2/-
* The Company installs tinting systems in various retail outlets across the country with a view to increase the demand for high value  products, especially water-based products.
* The Company has a nationwide distribution  network with 3 Regional Distribution Centers (RDCs) & 55 depots servicing 5,000+ dealers.
* Net Sales and PAT of the company are expected to grow at a CAGR of 16% and 19% over 2011 to 2014E respectively.
Investment Highlights
Results updates- Q3 FY13,
Shalimar Paints Ltd is one of the leading paints manufacturing companies of India, reported its financial results for the quarter ended 30th Dec, 2012. The Third quarter witnesses a healthy increase in overall sales as well as profitability of the company.
The company’s net profit jumps to Rs.46.90 million against Rs.37.90 million in the corresponding quarter ending of previous year, an increase of 23.75%. Revenue for the quarter increase 14.63% to Rs.1437.80 million from Rs.1254.30 million, when compared with the prior year period. Reported earnings per share of the company stood at Rs.2.47 a share during the quarter, registering 75.25% decrease over previous year period due to change in face value from Rs. 10.00 to Rs. 2.00. Profit before interest, depreciation and tax is Rs.117.40 millions as against Rs.97.20 millions in the corresponding period of the previous year.
Outlook and Conclusion
* At the current market price of Rs.136.00, the stock P/E ratio is at 14.87 x FY13E and 12.99 x FY14E respectively.
* Earning per share (EPS) of the company for the earnings for FY13E and FY14E is seen at Rs.9.15 and Rs.10.47 respectively.
* Net Sales and PAT of the company are expected to grow at a CAGR of 16% and 19% over 2011 to 2014E respectively.
* On the basis of EV/EBITDA, the stock trades at 6.87 x for FY13E and 6.03 x for FY14E.
* Price to Book Value of the stock is expected to be at 3.18 x and 2.55 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.153.00 for Medium to Long term investment.
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Buy Axis Bank For Target Rs.1,650

Axis Bank reported a better‐than‐expected Q3FY13, with positive surprise on asset quality and margins. Growth metrics have held up better than most corporate B/S‐ linked banks due to retail push and cumulative slippages, including restructuring which has held up better than management guidance. We believe asset quality stability over the last 2‐3 quarters would have addressed some investor concerns and with valuations remaining relatively undemanding at 1.9x FY14 (1.7x on diluted basis), we retain Axis as one of our top financials pick with a Mar‐14 PT of Rs1,650/share.
* Operating and growth metrics stable: Axis delivered a 5% beat on PPOP driven by better uptick in margins and lower opex growth. Margin surprise was largely due to lower share of Agri advances and some softening in wholesale cost of funds. The key positive in Axis’s metrics continues to remain core fee income growth of ~15% YoY despite contraction in large corporate fees, largely driven by retail and SME fees. Retail and SME also continue to drive B/S growth and despite just 6% B/S growth in 9M13, management is confident of delivering higher than industry growth in FY13 (seasonality).
* Asset quality better‐than‐expected: Gross NPA + Restructured book accretion of Rs9bn was lower than management guidance of Rs10-11bn quarterly slippage. Management expects slippages to be contained at similar levels and have maintained their near-term credit cost guidance of ~90bps. We believe the stability in asset quality will provide some comfort to investors on Axis’ corporate underwriting.
* Valuations undemanding, especially considering a dilution: With marginally improving macro, stable asset quality and relatively high return ratios, we believe, Axis Bank’s valuations at 1.9x FY14 book offers scope for a positive surprise. Valuations look undemanding at 1.7x FY14 book, especially considering post dilution ROEs of +17.5% in FY14-15. We retain ‘BUY’, with a Mar-14 PT of Rs1,650/share.
 
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Buy Tata Consultancy Services Ltd For Target Rs.1491.00


TCS is an Indian IT services, business solutions and outsourcing company headquartered in Mumbai, India.
* During the quarter, the robust growth of Net Profit is increased by 47% to Rs.35496.20 mn.
* TCS has added thirty-one new clients in the first quarter of the current fiscal.
* Total head count of the company as on Dec 2012 stood at 2,63,637 with utilization rate at 81.7%.
* TCS had won the prestigious “Supply Chain Project of the Year” at the Hermes Retail Weekly UK Supply Chain Awards 2012.
* TCS wins multi-million pound contract from the United Kingdom’s Home Office.
* TCS is collaborating with SAP AG on development of the SAP® Retail Execution mobile app version 3.0.
* TCS will set up operations in the state of Madhya Pradesh by building a new integrated campus in Indore for IT and BPO with an initial investment of Rs 550 crore in the first phase.
* TCS Ltd has declared a Third Interim Dividend of Rs. 3 per Equity Share of Rs. 1 each of the Company.
* Net Sales and PAT of the company are expected to grow at a CAGR of 23% and 16% over 2011 to 2014E respectively.
Investment Highlights
Results updates- Q3 FY13,
TCS Ltd. is the largest software company in Asia, having a wide range of offerings and catering to industries like banking and financial services, manufacturing, telecom, and retail, reported its consolidated financial results for the quarter ended 31st December, 2012.
The company’s net profit jumps to Rs.35496.20 million against Rs.24147.60 million in the corresponding quarter ending of previous year, an increase of 47.00%. Revenue for the quarter rose 48.84% to Rs.160699.30 million from Rs.107970.20 million, when compared with the prior year period. Reported earnings per share of the company stood at Rs.18.14 a share during the quarter, registering 47.00% increase over previous year period. EBITDA is Rs.162911.20 millions as against Rs.110911.60 millions in the corresponding period of the previous year.
Outlook and Conclusion
* At the current market price of Rs.1356.00, the stock P/E ratio is at 21.34 x FY13E and 18.46 x FY14E respectively.
*  Earning per share (EPS) of the company for the earnings for FY13E and FY14E is seen at Rs.63.55 and Rs.73.45 respectively.
*  Net Sales and PAT of the company are expected to grow at a CAGR of 23% and 16% over 2011 to 2014E respectively.
*  On the basis of EV/EBITDA, the stock trades at 14.72 x for FY13E and 12.68 x for FY14E.
* Price to Book Value of the stock is expected to be at 7.29 x and 6.03 x respectively for FY13E and FY14E.
* We expect that the company surplus scenario is likely to continue for the next three years, will keep its growth story in the coming quarters also. We recommend ‘BUY’ in this particular scrip with a target price of Rs.1491.00 for Medium to Long term investment.

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Accumulate South Indian Bank For Target Rs.28


South Indian Bank (SIB) reported a strong Q3FY13 largely driven by better‐than‐ expected rebound in margins. Gross NPA was down QoQ due to Rs0.4bn restructuring adjusted for which asset quality performance was satisfactory. Overall, Q3FY13 was a stable quarter. However, we maintain our cautious view as structural issues, both on liability (Low CASA) + priority sector compliance (~20% v/s 40% requirement), remain unsolved. We maintain ‘Accumulate’ with a PT of Rs28/share.
* Margin surprise drives PPOP performance: Sequential margin improvement of ~30bps was better-than-expected as not only did yield improve sequentially (no interest reversal v/s Rs200m in Q2FY13) but cost of funds also moderated marginally. Large part of PPOP surprise was related to margins, excluding which fee income performance was muted.
* Asset quality stable even adjusted for one‐offs: Gross NPAs came off QoQ driven by restructuring of MFI account “Samruddhi Finance” (Rs400m) adjusted for which Gross NPA performance was robust. Provisions were higher-thananticipated due to Rs300m of provisioning related to NAFED. SIB has made ~35% provisions on their NAFED exposure which is the initial haircut which management had anticipated on NAFED. Overall, adjusted for these one-offs, asset quality performance was relatively stable.
* ‘Accumulate’ on valuations; Other structural issues: SIB continues to have structural issues that we have highlighted earlier on dwindling CASA ratio and more importantly, large drop in PSL compliance which has led to complete dependence on very low credit costs to maintain 1% ROA. We see no material improvement on CASA and PSL front and believe that long-term ROAs will remain under pressure and hence, maintain our cautious stance. Undemanding valuations (1.15x FY14 book) refrain from downgrading to Reduce.
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