19/3/2013
Buy Wipro Ltd For Target Rs.480

We met the management of Wipro to understand the latest developments as restructuring ends. The company’s outperformance is pegged to their ability to execute their plans. We expect broad-based investments by the company to start bearing fruits in FY14. We reiterate our ‘BUY’ rating with a target price of Rs480.
* Environment turns more positive as clarity emerges: According to the management, clouds of uncertainty are finally clearing. The clients are taking IT investments decisions and sales cycle is improving. There is more certainty on spend compared to three months back.
* IMS ‐ Playing on the strength: Wipro derives ~24% (Q3FY13) revenue from IMS service line; however, lags peers in terms of exploiting growth opportunities in the same. The management has invested in tools and technologies in order to competitively bid for IMS contracts. IMS-led deals are structurally poised for lower pricing in each renegotiation; hence, these investments would be one of the key drivers for growth along with stability in margin. The company is also willing to takeover clients’ assets and employees.
*  Hunting & Farming ‐ To drive growth: Hunting: 1) 160 sales professionals, predominantly local professionals, industry experts etc. (recent hires) 2) Targeting F500/G2000 clients 3) Experts are vertically aligned 4) Actively monitoring IT budgets for prospective clients and value proposition being offered to them by Wipro. Farming: 1) ~200+ sales professionals 2) Targeting 138 clients 3) Mega-Gamma account – 55 (To achieve US$50m+ revs in 3 years)  4) Key Growth Account – 83 (To achieve US$30-50m revs in 3 years) 5) Each account has got one Key Client Partner (CEO of the account).
* Valuation and Recommendation – Reiterate ‘BUY’ with TP of Rs480: Wipro has gone through restructuring in the last 15 months. We believe that as the restructuring comes to an end, the execution of strategies hold the key. We believe that better macro-environment would be supportive for the success of their strategies. We expect company to return to industry-leading growth in FY14. We retain our ‘BUY’ rating.
 

 Buy Adani Port and Special Economic Zone For Target Rs.162


ADSEZ, after handling ~59 mn tonnes cargo for 9MFY13, is on track to handle ~80 mn tonnes in FY13E and ~95 mn tonnes by FY14E end. This surge will be driven by full commissioning of ~8.6GW capacities of Tata Power/ Adani Power, increase in crude volumes of Panipat (12MT of IOC) and Bhatinda (9MT of HPCL) refineries and increase in container volumes.
Company is also looking to Sell Abbot Point to Adani family which would help reduce the risk perception of the company (huge debt, near term losses and interest rate risk). It is also evaluating a few assets on the East coast of India, Dhamra being one among them. It has already placed a bid for Chennai container terminal project (4 mn TEUs) as another step towards the same goal.
Standalone Performance of the company continues to be strong. With Abbot set to be out of the books and cash flows from asset sale to be deployed in Indian ports, the stock at CMP of Rs 140/share trades at an attractive 12.1 FY14E EV/EBITDA. Based on WACC of 12% our SOTP based TP is Rs 162/share (Rs 156 earlier).
  Buy Wheels India Ltd For Target Rs.974.00


Wheels India Ltd has grown as a leading manufacturer of steel wheels for passenger cars, utility vehicles, trucks, buses, agricultural tractors & construction equipment in India.
* Wheels India Ltd has signed a technical agreement with Topy Industries, a leading Japanese wheel manufacturer that strengthen the passenger car wheel business.
* Wheels India Ltd received awards from TAFE, Toyota, Caterpillar and Maruti Suzuki for its performance, quality and supply of products.
* Wheels India Ltd has recommended the dividend a final dividend for the year ended March 31, 2012 at Rs 6/- (60%) per equity share of Rs 10/- each.
* The company supplies 2/3rd of the domestic market requirement and exports 18% of the turnover to North America, Europe, Asia Pacific and South Africa.
* Wheels India Limited is based in Chennai, India.
* Net Sales and PAT of the company are expected to grow at a CAGR of 16% and  27% over 2011 to 2014E respectively.

Outlook and Conclusion
* At the current market price of Rs.870.00, the stock P/E ratio is at 20.06 x FY13E and 17.05 x FY14E respectively.
* Earning per share (EPS) of the company for the earnings for FY13E and FY14E is seen at Rs.43.38 and Rs.51.03 respectively.
*  Net Sales and PAT of the company are expected to grow at a CAGR of 16% and 27% over 2011 to 2014E respectively.
*  On the basis of EV/EBITDA, the stock trades at 4.24 x for FY13E and 3.78 x for FY14E.
* Price to Book Value of the stock is expected to be at 303 x and 2.57 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.974.00 for Medium to Long term investment.
The Company is a supplier in some of the high volume newer models in the passenger car segment and is likely to benefit in the coming years. It continues to see reasonable growth in the construction and mining equipment business worldwide as also the non-wheel business. It has grew at around industry rates in all segments, it benefited from its relatively stronger position in the growing small commercial vehicle segment.
  Buy Swaraj Engines Ltd For Target Rs.544

Swaraj Engines Ltd is primarily engaged in the manufacturing of diesel engines, diesel engines components as well as its spare parts.
* During the third quarter, Revenue for the quarter rose 5.94% to Rs. 1245.70 million from Rs.1175.80 million, when compared with the prior year  period
* Swaraj Engines Ltd is in development of the 50 HP+ engine.
* The company undertaken an expansion project to increase annual capacity to 75,000 engines in 2 phases while 1st phase of expansion to  increase to 60,000 engines per annum.
* The engine sales volume posted a growth of 17% during the year under review & reached 55,239 units as compared to previous year sale of 47,413 units.
* Net Sales and PAT of the company are expected to grow at a CAGR of 14% and 12% over 2011 to 2014E respectively.

Results updates- Q3 FY13
Swaraj Engines Ltd is in business of supplying engines to swaraj division of Mahindra & Mahindra Ltd & supply of hi-tech engine components in India, reported its financial results for the quarter ended 31st Dec, 2012. The Third quarter witnesses a healthy increase in overall sales of the company.
The company’s net profit decline to Rs.137.60 million against Rs.140.80 million in the corresponding quarter ending of previous year, an decrease of 2.27%. Revenue for the quarter rose 5.94% to Rs. 1245.70 million from Rs.1175.80 million, when compared with the prior year period. Reported earnings per share of the company stood at Rs.11.08 a share during the quarter, registering 2.27% decrease over previous year period. Profit before interest, depreciation and tax is Rs.219.90 millions as against Rs.193.10 millions in the corresponding period of the previous year.

Outlook and Conclusion
The company performance for the financial year 2011-12 yet achieving new highs by taking the full advantage of enhanced engine demand from Mahindra & Mahindra Ltd - Swaraj Division for the first time has crossed the 50,000 mark both for production and sale of engines. The timely increase of production capacities coupled with productivity improvement initiatives enabled to achieve the milestone.
* At the current market price of Rs.486.00, the stock P/E ratio is at 10.62 x FY13E and 9.87 x FY14E respectively.
 * Earning per share (EPS) of the company for the earnings for FY13E and FY14E is seen at Rs.45.77 and Rs.49.25 respectively.
*  Net Sales and PAT of the company are expected to grow at a CAGR of 14% and 12% over 2011 to 2014E respectively.
 * On the basis of EV/EBITDA, the stock trades at 5.90 x for FY13E and 5.39 x for FY14E.
* Price to Book Value of the stock is expected to be at 2.69 x and 2.28 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.544.00 for Medium to Long term investment.