MINDTREE
Reco Price: Rs 508,
Target Price: Rs 660
MindTree expects the quantum of losses for restructuring the product business will be $3.6–3.9 million against an earlier indication of $12-14 million. These entire losses will be accounted in the December quarter and there will be no further impact. The costs are mainly in the nature of people separation, legal fees, asset write-offs and payments to vendors for cancellation of contracts. The actual amount of losses is 70 per cent lower than the indicated range. Further, there will be no impact on the financials from 4QFY11 onwards and that should address investor concerns. MindTree had announced launch of product business in April with an estimated investment/loss of $10-11 mn between April-September 2011. Subsequently in October 2010, company announced its decision to shut the product business and indicated restructuring cost of $12-14 mn. Maintain BUY.
— JM Financial Research
BAJAJ FINANCE
Reco price: Rs 700,
Target price: Rs 918
Bajaj Finance Limited (BFL) is a play on rising consumer spending in India, which is expected to grow multi-fold on rising disposable income. It has metamorphosed itself from Bajaj Auto’s finance arm to a diversified NBFC, where its loan book from Bajaj Auto is expected to reduce from current levels of 30 per cent to 23 per cent by 2011-12. The company has plans to foray into infrastructure financing. Diversification into other secured assets business will likely enhance quality of loan book. High yield consumer durable financing business and secured loans business is expected to show compound annual growth rate (CAGR) of 42 per cent and 100 per cent respectively, during FY10-FY12. Total disbursal and loan book will exhibit CAGR of 50 per cent during the same period. Balance sheet of BFL is well capitalised and tenure for the majority of borrowings is more than two years, which will help contain cost of funding in case of rising short term rates. Initiate coverage with buy.
— Motilal Oswal
HINDUSTAN DORR-OLIVER
Reco price: Rs 116,
Target price: Rs 138
Hindustan Dorr Oliver (HDOR) has an order-book of Rs 1500 crore and is strategically placed to benefit from the robust industrial production and increasing capex in the core industries in India. HDOR has undertaken various cost controls and quality control initiatives since it became a part of IVRCL, resulting in improving operational efficiency. HDOR has tapped new clients backed by strong brand equity, track record and presence across infrastructure segments of IVRCL. The sound and large balance sheet of the parent also helps HDOR to bid for bigger projects. The Davy Markham acquisition will provide technological expertise and equipment to strengthen its presence in domestic and overseas mining sector. The tie-up with SPIG will provide HDOR the exclusivity to participate and jointly bid for cooling tower projects. Maintain buy.
— Reliance Securities
SAGAR CEMENTS
Fair Value: Rs 202,
Current Price: Rs 138
Sagar Cements (Sagar) has grown from a mini cement plant to a mid-sized cement manufacturer with 2.35 mtpa grinding capacity in Andhra Pradesh, a cement manufacturing hub in India. It has JV with Vicat (France) for setting-up a fully integrated cement plant of 5.5 mtpa (2.75 mtpa to be operational in 2011-12). Sagar is entitled to 47 per cent stake in the JV with 19.7 per cent cash contribution – significant shareholder value accretion at low cost. However, over the next two years, Sagar’s profitability is expected to be impacted by the overcapacity in the southern region, with improvement post 2011-12, when the industry overcapacity is likely to ease. Crisil Equities expects two-year revenues CAGR of 4 per cent to Rs 460 crore in 2011-12, with EPS of Rs1, lower than Rs 13 in 2009-10.
— Crisil Equities
