Allahabad Bank, Patel Engg are favourites

STREET CUES

Allahabad Bank, Tech Mahindra, Patel Engineering and Aditya Birla Nuvo are the favourite picks of brokerage firms Angel Broking, Emkay Research and Enam Securities.

Mumbai-based brokerage house Angel Broking has recommended a 'buy' on Allahabad Bank. Allahabad Bank's net profit increased by 6 per cent y-o-y to Rs 750 crore during FY07 primarily due to higher share of fee-based income. Total business of the bank grew at a robust 30 per cent year-on-year to Rs 1 lakh crore. The bank is in a comfortable position on the capital adequacy ratio front.

"We believe that the bank's assets would grow at a reasonable rate and the bank would focus on improving its net interest margins (NIM) by enhancing its core operations. NIMs fell to 2.93 per cent with yield on advances of 9.67 per cent for this quarter," said its report on Allahabad Bank.

Angel Broking has put a target price of Rs 105 compared to its current price of Rs 79. Sarika Purohit Lohra, banking analyst at Angel Broking said, "The future outlook is bright for Allahabad Bank. The bank is focussed on its asset quality and we are looking for its Q1 FY08 performance."

Emkay Research has recommended a 'buy' on Tech Mahindra. Tech Mahindra posted revenue growth of 13.6 per cent q-o-q to Rs 875 crore in Q4 FY07 on the back of strong growth in the British Telecom account (17.1 per cent q-o-q).

Net profit before exceptional items grew by 17.6 per cent to Rs 196 crore in Q4. According to the Emkay report, "We believe the company has multiple margin levers in the form of increasing utilisations which is currently at 67 per cent, increased offshoring, currently at 61 per cent, and more hiring of freshers. We believe above margin levers would provide substantial cushion against future margin erosion."

Aditya Birla Nuvo has been rated an 'outperformer' by Enam Securities. Aditya Birla Nuvo (ABNL) reported a 44.3 per cent y-o-y growth y-o-y in Q4 FY07 at the top line driven by higher growth in telecom, financial services and the BPO segment.

"Net profit growth at 17.7 per cent y-o-y was impacted by higher interest outgo and depreciation," said the report.

According to Enam, holdings in Idea Cellular continue to be a dominant valuation driver for ABNL (about 65 per cent currently). In the life insurance sector, first year premiums in individual business segments grew at a muted rate of 10.7 per cent y-o-y in Q4 FY07.

"Our revised sum-of -parts valuation at Rs 1,376 indicates a fair share for telecom (64.7 per cent) and insurance (13.1 per cent ) share." The share closed on Friday at Rs 1,268.