Emkay Global

MindTree (Buy)

CMP: Rs 695.90

Target: Rs 800

We present the following justifications for our recommendation: a) Strength in IT services with good traction in manufacturing and BFSI banking, financial services and insurance). No untoward cancellations in PES recently with PES expected to report sequential growth in September quarter. b) Company maintains outlook of 11-14 per cent revenue growth for FY13 (4-6 per cent CQGR), however, it remains hinged on closure of some large deals. Street (including us) factoring in lesser than 11 per cent revenue growth. c) Company has hired 250 freshers in September quarter. Absorption of fresher offers could get extended by 1-2 quarters (driven both by lower than earlier estimated revenue growth/ attrition coming down). d) Tweak FY13/14E EPS higher by 10/6 per cent to Rs 76/81 on currency resets.

AMSEC

Symphony (Sell)

CMP: Rs 387.65

Target: Rs 377

Symphony fetches premium valuations as predictable and recurring revenues from the residential air-coolers provides high earnings visibility. Additionally, Symphony is in sweet spot in terms of exports as it has only scratched the surface of this high potential segment and the company is well-placed to exploit the same going ahead. We expect the industrial cooling segment to become a revenue spinner for Symphony. Being the only branded solution provider to enter this Rs 20-billion segment, Symphony is set to garner at least five per cent of the market share over the next three years. Undoubtedly, Symphony possesses the best earnings quality owing to strong brand name and asset-light model ensuring robust cash flows and high return ratios. Since our last recommendation the stock has rallied 94 per cent, way ahead of our target price making valuations expensive. Valuing the stock at 14x FY14E EPS, we set the target price of Rs 377. We recommend ‘Buy’ on declines.

(This article was published on September 20, 2012)
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