GMR INFRASTRUCTURE
Reco price: Rs 26
Target price: Rs 27
Analysts estimate GMR's Kishangarh-Udaipur-Ahmedabad highway (555 km length) will generate an equity IRR of 14 per cent (versus company guidance of 25 per cent). Accordingly, analysts have cut their target price to Rs 27 (versus Rs 29 earlier). This project would be EPS dilutive and accretive by 23 per cent (impact looks high since GMR is getting breakeven in FY13) and seven per cent in FY13 and FY14, respectively. Higher execution risk as 70 per cent of capex is on green-field projects, deferment of realty monetisation, regulatory uncertainty at airport and fuel supply risk are key concerns. Maintain underperform.
—Bank of America Merrill Lynch
MINDTREE
Reco price: Rs 385
Target price: Rs 270
MindTree reported a stronger-than-expected Q2FY12 with dollar revenues up 9.5 per cent q-o-q largely on higher pricing (up 3.1 per cent q-o-q). But the Ebitda came in only 1.5 per cent ahead of BNP Paribas view as higher wage costs, onsite revenue shift and SG&A expenses took away some of the revenue gains. The big 48 per cent EPS beat was driven by hedging and non-operational gains. IT services (up 10.1 per cent q-o-q) led the growth, while product engineering services (PES, 36 per cent of revenue) grew 8.5 per cent after several slow quarters. On the face of it, it appears the focus on core accounts (active clients declined 13 per cent q-o-q) is paying off. Maintain reduce.
—BNP Paribas