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Dolat Capital
MphasiS (Buy)
CMP: Rs 315
Target: Rs 390
MphasiS declared its Q4FY11 results, with a revenue decline of 3.8 per cent q-o-q at $ 276 million — four per cent below our estimates. Growth in rupee terms was two per cent at Rs 1,310 crore. The growth was largely driven by momentum in the direct channel business growth and consolidation of Wyde financials for two months. Wyde contributed about Rs 19,900 crore for the two months of consolidation. It added 25 new clients — 17 in the direct channels and is witnessing strong business traction in the insurance and BCM segment. The company has about 1,300 open positions to be added in the App/ITO business segment. But the BPO segment may see some more rationalisation in the quarter. We believe the results were disappointing as the company continues to report one-time items quarter after quarter. The low offtake from HP and weak sentiment in parent's earning commentary remains an overhang.
Edelweiss
Dabur (Buy)
CMP: Rs 95
Target: Rs 120
Our recent interaction with Dabur management has infused us with confidence that volume growth is likely to revive in Q3FY12 (five per cent in Q2FY12), shampoo growth is expected to stabilise (versus decline in past few quarters) and gross margin pressure is likely to recede. However, it must be noted that the company, in a bid to regain volume growth, is launching new products and enhancing ad spending, which may offset gross margin gains. But, we believe investment in brands to be long-term positive from Dabur's perspective. Revival in demand, calibrated price hikes, new launches and long-term benefits from international acquisitions Hobi and Namaste will act as long-term positives.
Karvy Stock
PowerGrid (Buy)
CMP: Rs 100
Target: Rs 118
PGCIL has currently operating at 23,800-MW transmissions capacity, and we expect that large capacity addition in generation in FY12-13E could improve projects execution in FY12-13E, when capitalisation is seen at Rs 9,300-11,900 crore, as against Rs 2,880 crore and Rs 7,550 crore in FY10 & FY11, respectively. We expect the regulated asset base to grow to Rs 37,400 crore in FY17E due to generation capacity addition and system strengthening. At the CMP, the scrip trades at 1.8x FY13E and 1.6x FY14E P/BV, respectively and 13.2x P/E of FY13E and 11.1x FY14E, which we believe is at a 28 per cent and 36 per cent discount to its historical average (FY07-11) P/B multiple. We use DCF methodology to value PGCIL, given the stable cash profile of its regulated business.
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