Brokers’ Call: Apollo Hospital, Tech Mahindra and United Spirit

Nomura Downgrades Apollo Hospital

Nomura has downgraded Apollo Hospital to ‘Neutral’ on the back of muted earnings growth and the recent strong rally in the stock.

Slippage in earnings, slowerthan estimated growth in average revenue per occupied bed (ARPOB), and delay in execution contribute to a 14-16% cut in earnings estimates.

Q4 results disappointed with 14% year-on-year revenue growth. ARPOB growth of 6% for FY13 and delay in execution in several hospitals were disappointing.

However, the long-term growth prospects remain on track. The brokerage continues to believe that Apollo is well placed to capitalise on rising demand in healthcare services in India.

TechM Still a Hold: Jefferies

Jefferies has maintained its ‘Hold’ rating on Tech Mahindra with a target price of Rs 1,030. Q4 revenues, with the benefit of the recent Comviva acquisition, showed decent growth.

Margins were in line, as cost rationalization was eaten away by cross currencies. Reduction in headcount continues and is a cause for concern. With no respite on the core telecom business, Satyam provides the only respite.

Revenues at $353m grew 7% qoq and were ahead of expectations ($337m). Organic growth was 1.5% qoq with volumes growing ~3% and realisations declining 1.5% qoq.

MS Overweight on USL

Morgan Stanley has resumed coverage of United Spirit with an ‘Overweight’ rating and set a target price ofRs 3,115. “Our in-depth analysis of tax structures and volume/pricing trends in key states suggest that USL has been overly focused on volume market share.” Morgan Stanley said in a report.

Pricing for the regular liquor segment in India is non-remunerative and likely unsustainable. “With the change in management control at USL, we expect a greater focus on profitable growth and consequent structural rise in profit pool for the liquor industry in India, the report added.