| Summary of Contents | | | | STOCK UPDATE Infosys Technologies
Cluster: Evergreen
Recommendation: Hold
Price target: Rs3,160
Current market price: Rs2,795
Price target revised to Rs3,160
Result highlights -
Infosys Technologies (Infosys)' Q1FY2011 results were below our and the Street's expectations with a 5.2% quarter-on-quarter (q-o-q) decline in the net income to Rs1,488 crore due to a lower than expected operating profit margin (OPM). Moreover, the upward revision in the guidance also failed to meet the Street?s expectations with the management taking a cautious stance due to global uncertainties. -
In Q1FY2011 the consolidated revenues of Infosys grew by 4.3% sequentially to Rs6,198 crore, which was in line with our estimate of Rs6,213 crore. The US Dollar (USD)-term revenues grew strongly by 4.8% quarter on quarter (qoq) to USD1,358 million, ahead of the company's guidance of USD1,330-1,340 million. In constant currency, the revenues grew by 6% sequentially driven by the volume growth (up 7.6%), which was much ahead of our and the Street's expectations. The realisation (in constant currency) declined by 0.6% sequentially. -
The OPM declined by 236 basis points sequentially to 31.7% mainly on account of wage hike, negative cross currency impact, marginal rupee appreciation and a decline in the blended realisations. However, the negative impact of the same was partially offset by a higher utilisation level. Consequently, the operating profit also declined by 3% qoq to Rs1,962 crore. -
In terms of the guidance for Q2FY2011, the dollar-term revenues are guided to be in the range of USD1,413-1,427 million (a 4.1% to 5.1% sequential growth). The earnings per share (EPS) are expected to increase by 5.4-7.4% sequentially to Rs27.42 to 27.95 per share. -
For the full year FY2011, the revenue growth guidance (in dollar terms) has been revised to 19-21%, up from16-18% earlier. The earnings guidance has also been revised upward to 5.2-9.6% from 4.3-8.6% in dollar terms. In rupee terms, the EPS guidance has also been revised upward to Rs112.21-116.73 from the earlier guidance of Rs108-111.3. The upward revision in the revenue guidance hints towards a strong demand environment and also eases the concern regarding Europe but the revision in the earnings guidance was below the Street?s expectations. In terms of verticals, the company expects a strong demand growth from the banking, financial service and insurance (BFSI), energy and retail verticals. -
We have increased our revenue estimates for FY2011 and FY2012 as we have now factored in a higher volume growth on account of the strong demand environment (as indicated by the 7.6% q-o-q volume growth in Q1FY2011). We have also revised our exchange rate assumption for FY2011 to Rs45.5 and that for FY2012 to Rs45. Consequently, we have increased our EPS estimates to Rs122.6 for FY2011 and to Rs143.7 for FY2012 mainly on account of the revision in our exchange rate assumption. -
At the current market price, the stock is trading at 22.8x its FY2011 and 19.5x its FY2012 earnings estimates. We maintain our Hold recommendation on the stock with a revised price target of Rs3,160. Sintex Industries
Cluster: Apple Green
Recommendation: Buy
Price target: Rs396
Current market price: Rs332
Price target revised to Rs396
Result highlights -
Sintex Industries (Sintex)' Q1FY2011 performance topped our projections on both revenue and earnings front. The consolidated bottom line came in at Rs78.9 crore (up 30.1% year on year [yoy]) as against our expectation of Rs72.3 crore. The results include one-off expense of Rs20.5 crore in interest relating to foreign exchange (forex) loss on foreign currency convertible bonds (FCCBs; worth Rs17 crore) and legal charges (of Rs3.5 crore). Adjusting for the same, the net profit stood at strong Rs99 crore in the quarter. -
The consolidated revenue from operations stood at Rs910.6 crore, a robust 37.5% up yoy, on account of stellar performance of the building product division (up 43% yoy) and the custom molding division (up 38.9% yoy; primarily due to Bright Autoplast), and a revival in the textile division (up 30% yoy). -
The operating profit increased by strong 57% yoy led by revenue growth and a strong 190-basis-point expansion in the operating profit margin (OPM) to 15.1%. -
As far as subsidiaries are concerned, Bright Brothers and Nief Plastics reported strong performance during the quarter. The revenue from Bright Brothers improved by 47% yoy and that from Nief Plast was up by 16% yoy. Zeppelin Mobiles continued to be a drag, posting a 15% year-on-year (y-o-y) decline in the quarterly revenue. -
The underlying demand in the monolithic construction business continues to be strong, with the company having a total order book of Rs2,300 crore to be executed over the next 20-22 month period. Further, the company is all set to expand its customer base in this segment, adding various government institutions (currently it is in talks with the Government of Karnataka). In the last 18 months, it has added couple of housing board orders; this will enhance its order repetitiveness from same geographies, leading to better utilisation of local contractors and material sourcing. We expect these initiatives to provide further impetus to the building material segment. Thus we expect the strong demand in the plastic segment (prefabs, monolithic and custom building businesses) to continue to drive the company?s growth in the near to medium term. Further, the revenue per site on rise will lead to optimal use of plastic form work resulting in improved margins. The scenario in the luxury textile business has started improving and we expect that the pain is behind, and going forward, we see incremental positives coming from this business. -
We maintain our bullish stance on the company on the back of strong revenue visibility and margin expansion in wake of strong growth in the building material (monolithic as well as prefabs) and the custom moulding divisions coupled with stable performance of the textile business. We expect the company to post an earnings compounded annual growth rate (CAGR) of 22% over FY2010-12E. We maintain our Buy recommendation on the stock with a revised price target of Rs396 (11x FY2012E). At the current market price the stock is trading at 12x and 9.3x its FY2011E and FY2012E earnings respectively.
| |
Attention: As per SEBI guidelines, clients who want to transact in the Futures & Options segment are required to submit proof of Financial Details. Kindly contact the nearest Sharekhan branch for more information or check the pop-up banner on our website, www.sharekhan.com.
| 
| |
No comments:
Post a Comment