IDBI Capital

TCS (Hold)

CMP: Rs 1,210

Target: Rs 1,250

TCS delivered yet another strong quarter and met our expectation on revenue (Rs 14,870 crore v/s IDBIest Rs 14,870 crore), EBIT margin (27.5 per cent v/s IDBIest 27.7 per cent) and net profit (Rs 3,280 crore v/s IDBIest Rs 3,150 crore). The company reported revenue at $2,728 million (IDBIest of $2,725 million), up 3 per cent sequentially led by strong volume growth of 5.3 per cent, ahead of our estimate of 4.8 per cent in first quarter. The management maintains its outlook on beating Nasscom estimates in CC. TCS' strategy of staying close to customers, offering full spectrum of services, being relevant to customers, investing in newer technologies, capabilities and infrastructure has helped it grow faster than peers. We estimate 13.0/13.6 per cent $ growth and 27.6/27.0 per cent EBIT margin in FY13E and FY14E respectively. The stock trades at 18.2x and 16.8x on our FY13E and FY14E EPS respectively. TCS is now firmly ensconced in “must have” list of investors' in Indian IT sector.

Nirmal Bang

PowerGrid (Buy)

CMP: Rs 112

Target: Rs 132

Augmenting capex followed by higher capitalisation (superior project execution run rate) of power transmission assets would boost core earnings of Power Grid Corporation of India (PGCIL). We believe PGCIL remains the safest bet among power transmission companies due to its annuity-based business model (15.5 per cent post-tax regulated RoE) despite the sector’s structural issues. Core demand, higher inter-regional capacity to limit regional deficits and reforms in the distribution space (state electricity boards’ losses, open access) are expected to increase the need for transmission corridors. We believe PGCIL is attractively positioned at the beginning of 12th Five Year Plan (FY13-17), considering the huge capex outlay planned, driving up its regulated equity.

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