Nirmal Bang

MM Forgings (Hold)

CMP: Rs 101

Target: Rs 139

We expect MMFL's sales in FY12E to grow at 22.5 per cent over FY11 whereas net profit is expected to grow at 19.1 per cent during the same period, on account of better utilisation of capacity. We expect that the company will continue to show improved performance in the coming quarters as well.

At the CMP of Rs 101 per share, MMFL is currently trading a PE of 5x FY12E EPS. Based on our EPS of Rs 19.89 for FY 2012 and a target multiple of 7x we arrive at target of Rs 139. Consequently, we recommend a ‘Hold' rating on the stock with a target price of Rs. 139.

Elara Capital

MphasiS (Sell)

CMP: Rs 368

Target: Rs 360

With the operational one offs unlikely to recur going forward, the margin compression story has still not played out completely. In spite of the 18 client additions, we do not see any aggressiveness in the headcount additions which seems to imply that the ramp up is not near dated. The only risk to our negative view on the stock is an improvement in revenue in Q4FY11 (driven by Wyde acquisition and the deferred revenue) and in margins (driven by additions at the lower end of the employee pyramid after the wage hike this quarter).

We are marginally adjusting our estimates downward and cutting our target price to Rs 360 based on our current FY12 EPS (October ending) implying a 9.0x target multiple.

MSFL Research

Unity Infra (Buy)

CMP: Rs 52

Target: Rs 80

Unity Infra reported lower than expected Q1FY12 results with sales growth of 10.7 per cent as against our expectation of 23.3 per cent. EBITDA margins came at 13.0 per cent versus our expectation of 12.6 per cent. Reported PAT came in higher at Rs 19.6 crore as against our expectation of Rs 15.6 crore on account of lower interest cost, higher other income and lower tax rate. Apart from a comfortable order book of Rs 3,470 crore (˜2x FY11 revenue), the company is on track to achieve its yearly inflow guidance of Rs 3,000-3,500 crore with a till-date inflow of Rs 783 crore and an L1 position of Rs 1,550 crore.

Also, the management has been taking effective steps in reducing the working capital in the construction business and release of advances paid by the parent to its real estate subsidiaries (real estate subs released Rs 76 crore to the parent in FY11). The recent re-organisation into various business verticals, steps to release locked capital and improve return ratios gives us an immense confidence in the management's plan and execution ability.

Anand Rathi

GVK Power (Buy)

CMP: Rs 17

Target: Rs 39

GVK is to acquire 14 per cent equity stake in Bangalore airport (BIAL) for $135 million from Siemens, subject to regulatory approvals. The implied value works out to $962 million (10x P/B) including real estate, +65 per cent than our DCF value ($583 million). The deal would be neutral to our GVK SOTP value of Rs 39 after adjusting for further BIAL stake and acquisition debt. Higher share in BIAL real estate proceeds could be SOTP positive. However, interest payments could dilute consolidated earnings.

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