Tata Consultancy Services
Reco price: Rs 815
Target price: Rs 860
TCS reported a revenue of $1.686 billion (+3.1 per cent quarter-on-quarter, or q-o-q, +17.7 per cent year-on-year, or y-o-y) — lower than expectations. However, significant cost controls resulted in margins expanding by around 20 basis points (bps) q-o-q to 29.9 per cent. Better than expected margin performance and higher other income led to net profit beating estimates. Profits grew to Rs 1,930 crore (+7.4 per cent q-o-q, +46.9 per cent y-o-y). Operating metrics performance fails to excite, especially in the context of Infosys’ splendid show. TCS might see some market share loss in key financial services during the quarter. The brokerage-adjusted FY11/FY12 estimates marginally higher revenue growth at 21 per cent/17.4 per cent y-o-y, resulting in marginal change to FY11/12 earnings per share (EPS) estimates at Rs 39.5/43. Maintain accumulate.
— Emkay Research
Axis Bank
Reco price: Rs 1,187
Target price: 1,312 For Q4FY10, Axis Bank reported a 31.5 per cent y-o-y increase in net profit at Rs 764.9 crore, which was slightly above estimates, whereas top line was according to estimates. However, the trend in asset quality was not encouraging with a 12.3 per cent q-o-q rise in gross non-performing asset (GNPA) and around 17 per cent of restructured advances already slipping into GNPA on a cumulative basis. The net interest income grew by 41.4 per cent y-o-y to Rs 1,460.1 crore on account of reduction in the cost of funds to 4.54 per cent in Q4FY10. The non-interest income grew by a moderate 10.4 per cent y-o-y to Rs 933.5 crore on account of a 38 per cent y-o-y drop in treasury gains. The stock is trading at 15.5x FY11E (estimated) earnings. Maintain buy.
— Sharekhan
GAIL
Reco price: Rs 425
Target price: 553
Also Read
The Petroleum and Natural Gas Regulatory Board (PNGRB) announced provisional tariffs for GAIL’s old and new pipelines. Surprisingly, PNGRB’s tariffs are different for old pipelines and the newer expansion, apart from being much higher than estimates. The brokerage revised its earlier tariff estimates from Rs 849/standard cubic metre (scm) to Rs 917/scm for FY11E and Rs 1,068/scm for FY12E respectively. Similarly, earnings estimates also stand increased at Rs 28.4 a share and Rs33.7 a share for FY11E and FY12E respectively. The announcement reduces the overhang and uncertainty regarding the transmission tariffs for GAIL, which should be a positive catalyst for the stock. On SOTP (sum of the parts) basis, GAIL is valued at Rs 53 a share (core business at Rs 420 a share, E&P at Rs 20 a share, cash and investment value of Rs 113 a share). At Rs 425, the stock is available at 12.6x FY12E EPS of Rs 33.7 and 2.4x FY12E price/book value (P/BV). Maintain buy.
— Angel Research
Nitin Fire
Reco price: Rs 373
Target price: Rs 489
Nitin Fire reported a strong Q4FY10 performance, with revenues more than doubling to Rs 105.4 crore, while earnings jumped 179 per cent to Rs 15.5 crore. Sales and earnings for FY10 grew 28 per cent and 27 per cent respectively. All the three business segments contributed to the revenue, the fire-fighting business grew 46 per cent y-o-y, and industrial cylinder (traded) sales grew 154 per cent y-o-y, while CNG cylinder sales grew 141 per cent y-o-y. Expect the strong growth momentum to continue in the coming year. The brokerage raised FY11 and FY12 revenue estimates by 6 per cent and 4 per cent, respectively, to factor in higher growth in the fire-fighting and industrial cylinder businesses. The earnings estimates change only marginally due to assumed margin contraction. The stock is trading at 9x one-year-forward estimated earnings. Maintain buy.
— Anand Rathi Research