16/04/2013

Buy Techno Fab Engineering Ltd For Target Rs. 122

Techno Fab Engineering Ltd is an electromechanical Engineering & Construction Company, serving the Power, Industrial and Infrastructure sectors.
* The company has secured new business aggregating over 477.00 Cr in by the end of January2013. of which a substantial portion from the overseas.
* The company order book is at Rs. 1125 Crores by the end of Q3FY13 and around 60 % of the order book is from Overseas.
* The largest share of the orders received from the water sector 37 % followed by the thermal power sector with the percentage of 23%.
* The company major customers during the year included HINDALCO, Fuel Trade, Ghana, National Thermal Power Corporation, Lanco &
Wonji Showa sugar factory in Ethiopia.
* The company has acquired 58228 fully paid up equity shares constituting 100% shareholding of Arihant Flour Mills Pvt. Ltd.
* Net Sales and PAT of the company are expected to grow at a CAGR of 17% and 13% over 2011 to 2014E respectively.

Results updates- Q3 FY13,
Techno Fab Engineering Ltd engineering and construction Company, serving the Power, Industrial and Infrastructure Sectors reported its financial
results for the quarter ended 31st December, 2012. The Third quarter witnesses a healthy increase in overall sales and moderate decline in profitability of the company.
The company net profit declines to Rs. 64.03 million against Rs. 86.24 million in the corresponding quarter ending of previous year, a decrease of 25.75%. Revenue for the quarter rose 8.79 % to Rs. 1050.60 million from Rs. 965.67 million, when compared with the prior year period. Reported earnings per share of the company stood at Rs. 6.10 a share during the quarter, registering 25.75 % decrease over previous year period. Profit
before interest, depreciation and tax is Rs. 1050.60 millions as against Rs. 965.67 millions in the corresponding 1period of the previous year.

Outlook and Conclusion
* At the current market price of Rs.111.00, the stock P/E ratio is at 3.87 x FY13E and 3.09 x FY14E respectively.
* Earning per share (EPS) of the company for the earnings for FY13E and FY14E is seen at Rs.28.71 and Rs.35.93 respectively.
* Net Sales and PAT of the company are expected to grow at a CAGR of 17% and 13% over 2011 to 2014E  respectively.
* On the basis of EV/EBITDA, the stock trades at 1.92 x for FY13E and 2.61x for FY14E.
* Price to Book Value of the stock is expected to be at 0.57 x and 0.48 x respectively for FY13E and FY14E.
* We recommend ‘HOLD’ in this particular scrip with a target price of Rs.122.00 for Medium to Long term investment.
 
 Reduce Infosys Ltd


Outlook
The Q4FY13 earnings of Infosys were to the dismay of the market as they missed their revenue and earnings guidance by a mile. Both revenue and earnings declared were below street expectations and the guidance given was far below everyone’s imagination. It is little wonder that the stock retreated or shall we say collapsed by a huge +20% post the result declaration.
Infosys’s revenue grew by 18% in Q4FY13 to Rs 10,454 crore YoY with a consolidated net profit of Rs 2,394 crore which was up by 3.4% YoY (+ 1.05 % QoQ). EBIT margins sharply declined by 213 bps on account of onsite wage hikes and lower utilisation.
While much of the damage is done we still believe that the stock could tank further albeit at a lower pace as the markets adjust the PE to reflect the benign outlook and mediocre Q4FY13 performance. We recommend a REDUCE on the stock.

Key Takeaways
• Geography wise, Europe’s contribution rose by 100 bps and for India it rose by 20 bps QoQ, whereas the rest of the world performed negative  with US at -80 bps.
• Key services revenue growth rose by a meager 20 bps QoQ for products, platforms and solutions (PPS) while it dropped marginally for business IT services. Infosys has put forth a decision to set aside US $100 mn for investment in products, platforms and solutions ideas in line with Infosys 3.0 strategy.
• Industry revenue growth plunged for retail and utilities segment but showed a growth of 50 bps QoQ in manufacturing.
• Top client contribution remained constant whereas the contribution from top 5 and top 10 clients rose marginally. Infosys and its subsidiaries added 56 new clients during the quarter.
• Employee utilisation rose by 80 bps QoQ (+ 70 bps QoQ excluding trainees) but was still not in sync with the management target of 78-80%. Infosys added 8,990 gross (1,059 net) employees during the quarter and currently its employee strength stands at 1,56,688.
• Onsite billing rose by 4.9% QoQ and 18% YoY to 81,794 person months in Q4FY13.
• Infosys gave an annual dollar revenue growth guidance of 6-10 % for FY14E, which is well below the market and Nasscom expectations. Infosys board recommended a final dividend of Rs 27 per share and has put forth a decision to set aside US $100 mn for investment in products, platforms and solutions ideas in line with Infosys 3.0 strategy.
• Currently at a CMP of Rs 2295, the stock is quoting at 13.0x and 11.8x its estimated earnings for FY14E and FY15E. While much of the damage is done we still believe that the stock could tank further albeit at a lower pace as markets adjust the PE to reflect the benign outlook and mediocre Q4FY13 performance. We recommend a REDUCE on the stock.
 


Buy Sun TV Network For Target Rs. 505


Digitization upside of ~INR160/sh; incorporating 50% into target price
* Sun TV's ability to charge on a per subscriber basis from DTH/digital cable operators implies relatively better monetization potential from digitization
* Four south Indian states constitute ~42m TV HHs. Sun TV's domestic subscription revenue can increase from ~INR5b in FY13 to ~INR12.5b assuming full digitization
* 16% EPS CAGR over FY13-15E driven by ad & broadcast revenue CAGR of 13% and domestic subscription revenue CAGR of 22%
* Upgrade to Buy with target price of INR505 (INR425 earlier) based on 18x FY15E EPS plus INR80/sh to incorporate 50% of potential digitization upside.

Explicit subscriber-linked model lends high digitization upside visibility
Sun TV enters "subscriber-linked" deals with DTH operators driving strong ARPU of INR38 and expects ARPU of ~INR25 from digital cable post digitization. Ability to efficiently monetize its viewership base lends high visibility to digitization led upside potential for Sun TV.
Domestic subscription revenue can improve from INR5b to INR12.5b
Sun TV has not yet benefited from the phase I digitization for Chennai due to ongoing legal proceedings and issues related to digital licence for Arasu. However four non-Tamil Nadu cities in its footprint (Bangalore, Hyderabad, Mysore, Vizag) fall in phase II digitization deadline and  constitute 4m of the 42m TV households in South India.
Digitization upside of ~INR160/sh
Sun TV's current cable revenue of INR1.4b implies an ARPU of only ~INR5 (v/s ~INR38 for DTH) from analog subscriber base of ~26m. Assuming a 30:70 mix for DTH:Digital cable and ARPU of INR38:INR25, post digitization revenue from this base could be ~INR8.9b. This implies revenue potential of ~INR7b over and above our current FY15 cable revenue estimate of ~INR2b. On a post-tax basis this represents EPS upside of INR11.8 and valuation upside of INR212 (P/E of 18x). Since this upside would likely be realized by FY17, we apply 15% discount rate for two years to arrive at digitization upside of INR160/sh.
13% Ad & broadcast CAGR over FY13-15E
Sun TV's ad & broadcast revenue is expected to grow 13% YoY in 2HFY13 v/s full year FY13 growth of ~8% YoY. Stable channel share trends and continued spends  by FMCG and local advertisers should help sustain 13% CAGR over FY13-15E.
Upgrade to Buy with target price of INR505/sh
We upgrade Sun TV from Neutral to Buy with a target price of INR505 (INR425 earlier) based on 18x FY15E EPS plus INR80/sh to incorporate 50% of potential digitization upside of INR160/sh. The stock trades at a P/E of 18.7x FY14E, 15.3x FY15E and offers 3.3% dividend yield.
  Buy Shriram Transport Finance co. Ltd For Target Rs. 745.00



Shriram Transport Finance co. Ltd is a part of Shriram Group, a prominent player in commercial vehicle financing business, chit funds, consumer finance, life insurance, general insurance, stock broking, property development, project engineering and IT.
* During the quarter; the robust growth of Net Profit is increased by 14.31% to Rs. 3459.90 million.
* Total Assets under Management as on 31st Dec, 2012 surged by 18.56% to Rs. 46,544.6 crores as compared to Rs. 39,259.59 crores
as on 31st Dec, 2011.
* Shriram Transport Finance plans to raise about Rs. 1000 crores through a public issue and the Shriram Group also plans to foray  into the retail business for vehicles and equipment.
* The company has declared an Interim Dividend of 30% i.e. Rs. 3/- per equity share of the face value of Rs. 10/- each fully paid up.
* Net Sales and PAT of the company are expected to grow at a CAGR of 10% and 5% over 2011 to 2014E respectively.

Investment Highlights
Results updates- Q3 FY13, The company is a part of Shriram Group, a prominent player in commercial vehicle financing business, chit funds, consumer finance, life insurance, general insurance, stock broking, property development, project engineering and IT,  among others, reported its financial results for the quarter ended 31st 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.3459.90 million against Rs.3026.80 million in the corresponding quarter ending of previous year, an increase by 14.31%. Revenue for the quarter rose by 16.66% to Rs.16734.90 million  from Rs.14344.70 million, when compared with the prior year period. Reported earnings per share of the  company stood at Rs.15.25 a share during the quarter, registering 14.01% increase over previous year period. Profit before interest, depreciation and tax is Rs.12584.20 millions as against Rs.10921.00 millions in the corresponding period of the previous year.

Outlook and Conclusion
* At the current market price of Rs.690.00, the stock P/E ratio is at 11.53 x FY13E and 10.89 x FY14E respectively.
* Earning per share (EPS) of the company for the earnings for FY13E and FY14E is seen at Rs.59.83 and Rs.63.39 respectively.
* Net Sales and PAT of the company are expected to grow at a CAGR of 10% and 5% over 2011 to 2014E respectively.
* On the basis of EV/EBITDA, the stock trades at 5.67 x for FY13E and 5.03 x for FY14E. Price to Book Value of the stock is expected to be at   .13 x and 1.78 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.745.00 for Medium to Long term investment.