Analysts' Picks: NIIT, BPCL, Patni
By ET Bureau |
NIIT Technologies
CMP: Rs 141.90
Target price: Rs 245
KOTAK Securities has maintained ���buy��� rating on NIIT Technologies though it said the company���s poor 4QFY08 results were below estimates on account of forex losses. It notes that the company���s IT services topline grew 7% while revenues from BPO operations were down by 10% quarter on quarter. Further, EBIDTA margins remained almost flat despite rupee depreciation. The company has reiterated that it remains unaffected by US economic issues till date. It says that new order intake is higher and the India business (although lower margin ) is growing faster. Kotak Securities says that upside exists from potential entry of strategic/financial partner through the parent NIIT���s 25% stake. But it warns that a prolonged recession in major user economies and a sharper-than-expected appreciation in rupee against major currencies would not augur well for the company.
BPCL
CMP: Rs 266
Target price: Rs 470
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Macquarie is bullish on the public sector refiner in the wake of the latest hike in fuel prices and a reduction in custom and excise duties on crude oil and petroleum products. But it concedes that ���uncertainty��� about the subsidy share for oil companies continues to exist. ���We believe that the proposed subsidy split is untenable and is likely to be revised,��� the report says. ���This and the $10-billion subsidy gap reconfirm our view that the announced subsidy share will be revised, as it has been on several past occasions,��� say Macquarie analysts. ���The oil-marketing companies��� subsidy burden is proposed to be hiked by $1.1 billion more than our current forecast, nearly halving earnings. We believe that this ad hoc proposal will not be implemented because it goes against the government���s primary intent to keep earnings largely constant,��� the report says. Patni Computer
CMP: Rs 241.45
Target price: Rs 320
Indiabulls Securities has maintained a ���buy��� rating on Patni Computer Systems, as it feels that the company���s buyback offer at Rs 325 per share would support the price which is quoting at a huge discount to its peers in the IT sector. ���At the CMP of Rs 241.2, the stock is trading at forward PE of 9.9 times for CY08E and 8.9 times for CY09E. It is, in fact, trading at a substantially higher discount of around 43% when compared to the industry average, says the report. Based on DCF valuation, the brokerage has arrived at a target price of Rs 320. According to the report, the company���s non-US revenue increased by 11.8% quarter on quarter, improving the revenue contribution to 23.4%. It has recorded modest revenue growth of 2.3% quarter on quarter at Rs 6,933.5 million, led by volume growth with marginal changes in pricing, says the report.
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ABG ShipyardCMP: Rs 418.30
Target price: Rs 554
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Prabhudas Lilladher has maintained an ���outperformer��� rating on ABG Shipyard even while reducing its target price to Rs 554. Citing slower order execution as a reason, the brokerage has reduced its topline estimates by 9.2% and 5.9% for FY09 and FY10, respectively. It has also revised its EBIDTA margin downwards by 30 bps and 50 bps for FY09 and FY10, respectively, saying that the increase in steel costs has not been hedged fully. The brokerage expects the company���s earnings to grow at 66.3% CAGR over FY09 and FY10 and the stock to trade at 12 times FY09 earnings (including subsidy) and 15 times FY09 earnings (excluding subsidy). The company is currently trading at 9 times FY09 and 5.1 times FY10 estimates. The report also highlights the fact that the company���s plans to raise further equity has been deferred on account of the sharp fall in stock prices, which may prompt the company borrow funds.Too busy to trade in stocks? Invest in Mutual Funds with ET Money!
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