Buy R S Software India Ltd For Target Rs. 152R S Software India Ltd is engaged with the world’s largest payment card association network & working for leading payment processor in US & UK.
* Revenue for the quarter increase 8.17% to Rs.762.20 million from Rs.704.60 million, when compared with the prior year period.
* R.S. Software has recommended Final Dividend for the Financial Year 2012-13 @ 20% i.e. Rs. 2 per share to the Equity Shareholders of the Company.
* R S Software has added 2 clients around long-term contracts with Y-O-Y price escalation clause.
* Profit before interest, depreciation and tax is Rs.141.60 millions as against Rs.114.20 millions in the corresponding period of the previous year.
* The future vision of the company is to become the global leader in providing technology solutions to the E-Payments industry.
* Net Sales and PAT of the company are expected to grow at a CAGR of 15% and 21% over 2012 to 2015E respectively.
Investment Highlights
Results updates- Q4 FY13,
R S Software India Ltd is engaged with the world’s largest payment card association/ network & working for leading payment processor in US & UK, reported its financial results for the fourth quarter and year ended of 31st March, 2013.
The company’s net profit decreased to Rs.84.80 million against Rs.90.80 million in the corresponding quarter ending of previous year, a decrease of 6.61%. Revenue for the quarter increase 8.17% to Rs.762.20 million from Rs.704.60 million, when compared with the prior year period. Reported earnings per share of the company stood at Rs.7.00 a share during the quarter, registering 11.54% decrease over previous year period. Profit before interest, depreciation and tax is Rs.141.60 millions as against Rs.114.20 millions in the corresponding period of the previous year.
Outlook and Conclusion
* At the current market price of Rs.139.00, the stock P/E ratio is at 4.03 x FY14E and 3.58 x FY15E respectively.
* Earning per share (EPS) of the company for the earnings for FY14E and FY15E is seen at Rs.34.49 and Rs.38.78 respectively.
* Net Sales and PAT of the company are expected to grow at a CAGR of 15% and 21% over 2012 to 2015E respectively.
* On the basis of EV/EBITDA, the stock trades at 2.13 x for FY14E and 1.84 x for FY15E.
* Price to Book Value of the stock is expected to be at 1.08 x and 0.89 x respectively for FY14E and FY15E.
* We recommend ‘HOLD’ in this particular scrip with a target price of Rs.152.00 for Medium to Long term investment.
Buy Development Credit Bank For Target 64 Beats expectation once again; inching towards targeted goals Development Credit Bank (DCB) reported good results yet again beating our and
street expectations driven by strong growth in NII, improved cost to income ratio and higher profitability. PAT almost doubled on YoY basis and increased 26.9% QoQ to Rs 34.1 cr in Q4FY13. For FY13, NIMs stood at 3.35% led by higher yield on advances and control over cost of funds. PAT increased 85.4% YoY to Rs 102.1 cr for FY13.
We have seen DCB emerging strong through tough times with focus on secured credit which has led to an overall improvement in advance book and the liability profile of the bank. The bank has shown steady progress in most of the performance parameters be it sustainable NIMs, focus on increasing share of fee income, cost efficiency and controlled credit cost. We believe that the bank will embark on expansion plans over the next 2-3 years and gear itself for next innings. We expect the bank to report 22.3% CAGR in PAT over FY13-FY15E leading to RoE of 12.7% and RoA of 1.1% for FY15E. At CMP, the stock is trading at 1.01x and 0.89x FY14E and FY15E Adj BVPS and 8.4x and 7.07x FY14E and FY15E EPS respectively which we believe is attractive and therefore we continue to maintain our BUY rating on the stock. Our target price for the stock is Rs 64 based on P/ABV multiple of 1.45x on its FY14E adjusted book value of Rs.43.7 per share.
Net Interest Income increased by 13.2% on QoQ basis and 43.2% YoY to Rs 81.5 cr in Q4FY13; higher than expectations. NIM stood at 3.52% in Q4FY13 as compared to 3.38% in Q3FY13 and 3.12% in Q4FY12.
Going forward Management is quite comfortable in maintaining NIMs in the range of 3.0-3.25% for FY14E.
Cost to income ratio stood at 62.5%; the lowest in the history of the bank.
DCB reported growth in advances both on QoQ and YoY basis (+24.6% YoY and 10.4% QoQ) at Rs 6,586 cr mainly due to increase in the priority sector lending further backed by growth in SME/Micro SME and mortgage book.
Mortgages continued to form the highest proportion of loan book.
The bank managed to witness 15% YoY growth in SA whereas CA continued to remain under pressure dragging the overall CASA ratio to sub 30% levels.
Gross NPA declined 11.1% YoY and 8.1% QoQ basis to Rs 215 cr on absolute basis. Gross NPA ratio and Net NPA ratio were at 3.18% and 0.75%
respectively in Q4FY13. Fresh slippages during the quarter stood at Rs 22 cr vs Rs 20 cr of slippage in Q3FY13 mainly pertaining to SME/MSME and mortgage book. Overall slippages for FY13E stood at Rs 75 cr.
In an attempt to keep asset quality under check, Management has reduced the average ticket size of the SME loan from Rs 6-7 cr earlier to Rs 3-4 cr and has also enhanced the collateral to ~80-90% from earlier 60-70%.
Provision coverage ratio declined marginally to 85.71% in Q4FY13.
Capital Adequacy Ratio stood at 13.61% as on March 2013 of which Tier I Ratio stood at 12.62%.
Buy Cairn India For Target Rs.370Post the policy clarity on exploration in producing E&P blocks, Cairn India has recommenced exploration at its Rajasthan block after a 4-year gap. Given the proven prospectivity of the block and aggressive drilling program (100 wells in 3 years) and similar to earlier exploration period, we expect further addition to its reserve potential.
* On the production front, while near-term ramp-up needs to be watched, given the slow ramp-up at Bhagyam and earlier than expected decline in Mangala, the management guidance to achieve FY14 exit production of 200-215kbpd is positive.
* Cairn's large cash balances (USD4.7b by end-FY15; 48% of current market cap) are at higher than optimum levels. Given that the company has no definite large acquisition plans, the management should (a) increase dividend or announce a special dividend, and/or (b) buy back shares to reward shareholders.
* The stock has corrected 19% in last 3 months led by ramp-up concerns and we estimate that the current price discounts long-term Brent price of USD75/88/bbl with/without exploration upsides. We believe that ramp-up concerns will be short-term and with likely reserve accretion, the risk-reward is favorable and upgrade our rating from Neutral to Buy. Our SOTP-based target price is INR370 implies an upside of 33%.
FY14 exit production guidance of 200-215kbpd at Rajasthan, a positive
Despite earlier (4QFY14) than expected natural declines in Mangala field, production is likely to ramp-up from current ~171kbpd (Mangala: 150kbpd; Bhagyam: 20-25kbpd) to 200-215kbpd (management guidance) by the end of March 2014, led by production start at (a) Aishwariya in March 2013, and (b) Barmer fields in 2HFY14. We cut our FY14/FY15 average production estimates by 4%/16% to 182/ 185kbpd, led by assumed decline at Mangala. While near-term production issues have created some ramp-up uncertainty, we do not expect any change in the overall recoverable reserves and maintain our gross recovery estimate at 1.2bboe.
With exploration back on track, expect further reserve addition
Over the years, Cairn has increased the gross in-place resource estimate for its Rajasthan block by ~4x to 7.3bboe and recoverable reserve estimate by 2.2x to 1.2bboe. Now, with 100 exploratory wells planned in three years, we expect further increase in recoverable reserves to 1.7bboe through conversion of 0.5bboe of prospective resources into reserves. We currently model recoverable reserves of 1.2bboe in our valuation and do not assign any value to the likely addition of 0.5bboe.
Valuations attractive; upgrade to Buy, with a price target of INR370 We believe that the current market price of INR278 factors in long-term Brent price of USD75/88/bbl with/without exploration upsides. The stock is trading at 5.6x FY15E EPS of INR49.8 and the implied dividend yield is ~4%. We revise our rating from Neutral to Buy. Our target price of INR370 implies an upside of 33%.
Buy Wheels India Ltd For Target Rs.974.00Wheels 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 Bharat Heavy Electricals Limited For Target Rs.258.00Bharat Heavy Electricals Ltd engaged in the design, engineering, testing, manufacture, construction, commissioning & servicing of a wide range of products and services for the core sectors of the economy.
* BHEL has commissions 500 MW Unit at Indira Gandhi Super Thermal Power Project, Jhajjar.
* BHEL has signed a five-year Enterprise Framework Agreement with Shell for the supply of Gas Turbine Generator packages.
* BHEL achieves with deployment of Space Grade Solar Panels and Batteries on GSAT- 10 Satellite of ISRO.
* During the quarter, the robust growth of Net Sales is increased by 0.15% to Rs. 105615.50 million.
* BHEL has signed an agreement with the Ministry of Energy and Industry, Republic of Tajikistan to set up a 100 MW Hydro Electric Power Plant in Tajikistan.
* The company has an outstanding order book position of about Rs. 1223000 million at the end of Q2 FY13.
* BHEL has won an order for Steam Turbine Generators for new rating 700 MWe Nuclear Sets, based on Pressurized Heavy Water Reactors.
* Net Sales and PAT of the company are expected to grow at a CAGR of 12% and 12% over 2011 to 2014E respectively.
Investment Highlights
Results updates- Q2 FY13,
Bharat Heavy Electricals Ltd is an integrated power plant equipment manufacturer and one of the largest engineering and manufacturing companies in India, reported its financial results for the quarter ended 30th Sep, 2012.
The company’s net profit decreased to Rs.12744.50 million against Rs.14120.30 million in the corresponding quarter ending of previous year, and decrease of 9.74%. Revenue for the quarter rose 0.15% to Rs.105615.50 million from Rs.105455.10 million, when compared with the prior year period. The EPS of the company is declined due to change of face value from Rs.10/- to Rs.2/-. Reported earnings per share of the company stood at Rs.5.21 a share during the quarter. Profit before interest, depreciation and tax is Rs.20301.40 millions as against Rs.21790.60 millions in the corresponding period of the previous year.
Outlook and Conclusion
* At the current market price of Rs.230.00, the stock P/E ratio is at 7.20 x FY13E and 6.66 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.34.54 respectively.
* Net Sales and PAT of the company are expected to grow at a CAGR of 12% and 12% over 2011 to 2014E respectively.
* On the basis of EV/EBITDA, the stock trades at 4.15 x for FY13E and 3.79 x for FY14E.
* Price to Book Value of the stock is expected to be at 1.70 x and 1.35 x respectively for FY13E and FY14E.
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