18/03/2013

Buy Infosys Ltd For Target Rs.3165


Lodestone acquisition panning well for Infosys......Upgrade from HOLD to BUY, raise target from Rs.2,685 to Rs.3,165
* Infosys acquisition of Switzerland based global management & SAP consultancy firm Lodestone started showing reflection of new business wins. The company won five-year multi-million dollar infrastructure management services deal from BMW Group.
* In order to service this deal Infosys will open a new delivery centre in Munich as part of its global service delivery team. The new delivery center will provide maintenance & operations to web infrastructure, content management and business intelligence systems services.
* In the third quarter of fiscal 2013, the revenues from Europe went up 16.6% qoq (14.4% on constant currency terms). This was primarily due to revenue consolidation of Loadstone, which nearly has 200 clients in Europe.
Our Take
* Even though financial details of BMW deal was not disclosed, but win reaffirms the management commentary on Loadstone’s acquisition potential. Further, the management intention to scale the Europe (primarily Germany, Switzerland & France) revenue contribution from 24% to ~40% in long-term also looks achievable.
* In our view, increasing investment in Europe/APAC will not only accelerate revenue growth but also diversify revenue risk, which is highly dependent currently on single geography (i.e North America).
Valuation & Outlook
At CMP of Rs.2874, the stock is trading at 17.3x FY13E and 15.8x FY14E EPS estimates. TCV of $731 mn in Q3FY13 exemplifies Infosys aggression and flexibility towards bagging the multi-million dollar deals. Further, improving global companies’ earnings outlook could trigger discretionary budget, which was on freeze from many quarters. We upgrade our rating to BUY from HOLD, as we rollover to FY14 earning and increase our target price to Rs.3165 (from previous TP Rs.2685).
 Buy Syndicate Bank For Target Rs.135.00



Syndicate Bank is Centralized Banking Solution enabled; is well equipped to meet the challenges of the 21st century in the areas
of IT, knowledge and competition.
* Bank’s Capital Adequacy Ratio has marginally come down to 11.38% as on 31 Dec 12, compared to 11.48% as on 31 Dec 11 and Comfortable with its CRAR.
* The Base Rate and BPLR of Syndicate Bank stands reduced from 10.50% to 10.25% and from 14.75% to 14.50%, respectively, with
effect from February 13, 2013.
*  During the quarter, the Bank has mobilised subordinated debt of t 1000 Crores for Tier II Capital.
* The Bank has posted a net profit of Rs. 5084.90 million for the quarter ended December 31, 2012 as compared to Rs. 3381.20 million for the quarter ended December 31, 2011.
*  Bank has 1241 ATMs and 500 New ATMs will be opened during the year and about 4000 banking outlets.
*  Total Income has increased from Rs. 42143.50  mn for the quarter ended Dec. 31, 2011 to Rs. 44899.00 mn for
the quarter ended Dec 31, 2012.
*  During the fiscal, Bank has opened 42 branches to reach a branch network to 2737 plus 1 overseas branch at London.
Investment Highlights
Results updates- Q3 FY13
The Syndicate Bank continues to show strong performance in terms of growth of Net Interest Income, Fee Income and Operating Revenue. The net profit of the Bank jumps to Rs. 5084.90 million against Rs.3381.20 million in the corresponding quarter ending of previous year, an increase of 50.39%. Revenue for the quarter rose 6.21% to Rs. 42205.90 million from Rs. 39739.40 million, when compared with the prior year period. Reported earnings per share of the company stood at Rs. 8.45 a share during the quarter, registering 43.23% an increase over previous year period. Net Interest Income is Rs. 44899.00 millions as against Rs. 42153.50 millions in the corresponding period of the previous year.
Outlook and Conclusion
*  At the current market price of Rs.120.85, the stock P/E ratio is at 4.11 x FY13E and 3.59 x FY14E respectively.
* Earning per share (EPS) of the company for the earnings for FY13E and FY14E is seen at Rs. 31.96 and Rs.36.64 respectively.
* Net Sales and PAT of the company are expected to grow at a CAGR of 18% and 28% over 2011 to 2014E respectively.
* On the basis of Debt-Equity Ratio, the stock trades at 19.46 x for FY13E and 18.32 x for FY14E.
*  Price to Book Value of the stock is expected to be at 0.79 x and 0.65 x for FY13E and FY14E respectively.
We expect that the Bank continues to show strong performance in terms of growth of Net Interest Income, Fee Income and Operating Revenue due to sizeable reduction in high cost deposits/CDs improving Yield on credit /MSME and Mid – Corporate Finance and better Credit monitoring. The Bank has taken several initiatives by Launching new products and services for increasing its business in the coming Quarters. So, we will keep its growth story in the coming quarters also. We recommend ‘BUY’ in this particular scrip with a target price of
Rs. 135 .00 for Medium to Long term investment.

 Buy Cords Cable Industries Ltd For Target Rs.23.00


Cords Cable Industries Ltd is in business of providing cost-effective & quality solutions for electrical connectivity requirements.
* The company’s net sales registered a 1.37% increase and stood at a record Rs. 804.16 million from Rs. 793.32 million over the corresponding quarter last year.
* The company’s net profit registered a 16.38% increase and stood at a record Rs. 12.29 million from Rs. 10.56 million over the corresponding quarter last year.
* Cords Cable Industries has bagged an Export Order Valuing Over U.S. $2.18 million from its worldwide
recognized French Customer for Supplies to the state of Kuwait.
* During the year FY11-12, Credit Analysis & Research Ltd. has re-assigned “CARE BBB+” & “A3+” rating to Long
Term & Short Term Bank  facilities of the Company.
* The company has International approval for LT Power cable, control cable, instrumentation cable, signaling cable,
communication cable & thermocouple cable from Tatweer petroleum, kingdom of Bahrain".
* Net Sales and PAT of the company are expected to grow at a CAGR of 12% and 9% over 2011 to 2014E respectively.
Investment Highlights
Results updates- Q3 FY13,
Cords Cable Industries Ltd leading global player providing products & services offering comprehensive solutions
to electrical connectivity requirements of business, reported its financial results for the quarter ended 31 DEC, 2012. The Third quarter witnesses a healthy increase in overall sales as well as profitability of the company.
The company net profit jumps to Rs.12.29 million against Rs.10.56 million in the corresponding quarter ending of previous year, an increase of 16.38%. Revenue for the quarter increase 1.37% to Rs.804.16 million from Rs.793.32 million, when compared with the prior year period. Reported earnings per share of the company stood at Rs.1.08 a share during the quarter, registering 16.38% increase over previous year period. Profit before interest, depreciation and tax stood to Rs.89.35 millions as against Rs.81.83 millions in the corresponding period of the previous year.
Outlook and Conclusio
*  At the current market price of Rs.20.50, the stock P/E ratio is at 3.78 x FY13E and 3.38 x FY14E respectively.
* Earning per share (EPS) of the company for the earnings for FY13E and FY14E is seen at Rs.5.43 and Rs.6.06 respectively.
*  Net Sales and PAT of the company are expected to grow at a CAGR of 12% and 9% over 2011 to 2014E respectively.
* On the basis of EV/EBITDA, the stock trades at 2.29 x for FY13E and 2.09 x for FY14E.
*  Price to Book Value of the stock is expected to be at 0.23 x and 0.21 x respectively for FY13E and FY14E.
* We recommend ‘BUY’ in this particular scrip with a target price of Rs.23.00 for Medium to Long term investment.
  Buy Indian Oil Corporation Ltd


3QFY13 results better than expected: IOCL’s PAT for 3QFY13 was INR33b (v/s our est. of INR1.1b) as against INR24.9b in 3QFY12 and INR96.1b in 2QFY13. EBITDA was INR51b, higher than our estimate of INR21.6b, led by (a) net over-recovery of INR4b (v/s our estimate of net under-recovery of INR26.7b), and (b) higher GRM of USD6.2/bbl against our estimate of USD4.8/bbl (resulted in additional EBITDA of ~INR8.5b), though the benefits were partly offset by (a) higher staff costs to the tune of INR2.9b, and (b) adventitious loss (on products) of INR3.6b. Interest expenses and depreciation were broadly in line at INR13.2b and INR16.7b, respectively. Given the ad-hoc subsidy sharing, we believe quarterly financials are not indicative of the full year performance.
* 9MFY13 PAT negative despite government subsidy: The upstream companies have compensated IOCL INR243b in 9MFY13 and the government has already provided a support of INR296b. However, this compensation was inadequate and resulted in INR132b loss for IOCL in 9MFY13. As in previous years, we model that major portion of the government subsidy would be received in 4Q. For FY13, similar to FY12, we model subsidy sharing of 60% by the government, 40% by upstream, and nil by OMCs.
Valuation and view
* Our positive stance on the stock is driven by the recently announced diesel reforms, following which gross under-recoveries are likely to reduce by 50% by FY15. For OMCs, in the initial period of reforms, stock performance will largely be led by re-rating. The earnings benefit will be limited, as we already assume nil subsidy sharing in FY14.

* We model monthly hike of INR0.45/liter in diesel price and expect OMCs to be fully compensated by upstream (40% share) and the government (60% share) for the under-recoveries. Buy.