Sensex

Wednesday, July 24, 2013

Fw: Investor's Eye: Update - Yes Bank, United Phosphorus, Banking; Viewpoint - Hero MotoCorp

 
Investor's Eye
[July 24, 2013] 
Summary of Contents
 
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STOCK UPDATE
Yes Bank
Recommendation: Buy
Price target: Rs510
Current market price: Rs383
Price target revised to Rs510 
Result highlights
  • Yes Bank's Q1FY2014 performance was above our estimate as the net profit grew by 38.2% year on year (YoY) to Rs400.8 crore. A strong growth in the net interest income (NII) and a treasury gain to the tune of Rs97 crore drove the overall growth in earnings.
  • The NII of the bank grew by 39.6% YoY (3.3% quarter on quarter [QoQ]) led by a strong growth in the customer assets. The net interest margin (NIM) was stable at 3.0% on a sequential basis.
  • The growth in advances including credit substitutes was at 24.2% YoY (excluding credit substitutes, the growth was at 24.3% YoY). The corporate advances grew by 23.1% YoY while the retail advances grew at a faster rate of 41.6% YoY. The deposits grew by 29.9% YoY on account of a robust growth in the current and savings account (CASA) deposits. The CASA ratio of the bank rose to 20.2% from 18.9% in Q4FY2013.
  • A strong non-interest income growth compensated for the sharp rise in provisions (up 223.2% YoY). In Q1FY2014, the bank booked a treasury gain of Rs97 crore. Other streams like financial advisory and retail banking also posted a strong growth. The cost-to-income ratio inched up marginally to 38.3% from 37.7% in Q4FY2013.
  • The asset quality deteriorated marginally in Q1FY2014 as the absolute gross non-performing asset (NPA) rose by 11.2% sequentially due to a couple of accounts to the tune of Rs25 crore that slipped into NPA. Consequently, the gross NPA rose by 2 basis points sequentially to 0.22%. However, the outstanding restructured book declined to Rs139.5 crore (0.29%) from Rs144.2 crore in Q4FY2013 (0.31%) on account of the upgrades.
Valuation
Yes Bank's net earnings came in ahead of our estimate due to a higher NII growth and treasury gain. We believe the recent measures taken by the Reserve Bank of India (RBI) will not only raise the cost of funds for the banks but may also impact the advances growth. Though the bank's NIM has largely been stable, we expect the pressure on NIM to rise due to higher dependence on wholesale funds. Therefore, we have fine-tuned our estimate and revised our valuation multiple to 1.9x leading to a price target of Rs510. After the recent correction in the share price, the valuation seems reasonable; hence, we maintain Buy rating on the stock.
 
United Phosphorus
Recommendation: Buy
Price target: Rs180
Current market price: Rs142
Results in line; margin improves 
Result highlights
  • Revenues in line with expectation; driven by 7% increase in volume offtake: During Q1FY2014, the consolidated revenues of United Phosphorus Ltd (UPL) grew by a robust 10.5% to Rs2,456 crore as compared with Rs2,222 crore in Q1FY2013, while the reported profit after tax (PAT) for the quarter stood at Rs213 crore, which is a growth of 4.8% year on year (YoY) and includes a net foreign exchange (forex) loss of Rs41 crore. Adjusting to the net forex loss, the PAT stood at Rs254 crore, which was ahead of our as well as the Street's estimates. The revenue growth was aided by a higher blended realisation (2%) and currency benefit (2%) in addition to a 7% growth in the volume offtake, which was largely driven by a robust performance across the geographies except North America (due to a delay in sowing of corn and cotton because of the tough environmental condition). The hike in prices during the quarter was higher in the domestic market compared with other geographies. 
  • Margin aided by currency gain and better product mix: During Q1FY2014, the operating profit margin (OPM) improved marginally by 85 basis points YoY to 18.6%, thereby reversing the declining trend experienced in the margin in the past four quarters. This was largely on account of a better product mix and currency benefit. The gross debt in its balance sheet at the end of the quarter was around Rs4,200 whereas the net debt stood at Rs2,680 crore, which includes revaluation due to currency deprecation to the tune of Rs161 crore. During the quarter, the total cash generation was to the tune of Rs350 crore.
  • Demand outlook positive across geographies; management maintains guidance: The demand environment for agrochemicals remains positive across the world on account of a favourable weather condition projected by different metrological departments. North American and the domestic markets are expected to play a key role in the revival of demand for agrochemicals as both the markets were witnessing an uneven weather pattern. The management has maintained its guidance of 12-15% growth in FY2014, which is largely in line with our estimate. The effective tax rate for FY2014 will be in range of 22-25%. The total capital expenditure (capex) plan for FY2014 is in the range of Rs400 crore.
  • Valuation-retain Buy recommendation: UPL's decent Q1 results, a positive commentary by the management on the demand outlook this fiscal and an attractive valuation leave scope for rerating in the stock. Consequently, we maintain our positive stance on the company and retain Buy recommendation with a price target of Rs180.
 

 
SECTOR UPDATE
Banking 
RBI tightens the noose; banks with low CASA (retail deposits) worst hit
In the past couple of weeks, the Reserve Bank of India (RBI) announced several measures to curb the exchange rate volatility. The measures ranged from tightening of the liquidity (by capping the liquidity adjustment facility [LAF] borrowing to 1% of net demand and time liabilities [NDTL] and then revising it to 0.5% of NDTL on July 23) and raising rates (marginal standing facility [MSF] and bank rate hiked by 200 basis points on July 15). The RBI took further measures to tighten liquidity by virtually tightening the reserve ratios since it has asked the banks to maintain 99% of cash reserve ratio (CRR) requirement on daily average basis compared with 70% allowed earlier. These measures are likely to suck the liquidity to the tune of Rs90,000 crore and probably help the RBI's objective of reducing the speculation on currency. We believe these steps are quite stringent and will create serious liquidity deficit in the system.
Bonds yields to rise; cost of borrowings to inch up for banks
While the RBI and the government have suggested that the measures are temporary, but we believe it could sustain longer, thereby exerting an upward pressure on rates. The short-term yields have gone up by about 140 basis points in the past fortnight while the 10-year benchmark has increased by 60-70 basis points to 8.2%. We believe this will lead to an increase in the funding costs for banks and non-bank financial companies (NBFCs), which will be difficult to pass on to borrowers given the sluggishness in the economy and corporate earnings. Further, the rise in the bond yields devoid the banks of treasury profits and they might even have to provide for depreciation on their investment book.
Banks with weaker funding profile are likely to be impacted most
We believe the banks with weaker deposit profile and higher dependence on wholesale funds may even have to borrow from the MSF window at 10.25%. The deposit growth already remains weak and we expect some hardening in the deposit rates (mainly in shorter maturities), which should impact the net interest margins of banks. The advances growth will also suffer as higher interest rates and weak economic growth will deter borrowers. Within our coverage universe, banks like Corporation Bank, IDBI Bank and Yes Bank will face relatively higher pressure due to a lower current and savings account (CASA) ratio and a higher bulk funding.
Asset quality concerns persist
Due to an adverse economic scenario, policy uncertainties and higher interest rates, the asset quality concerns are likely to persist, thereby raising the credit costs for banks. The measures taken by the RBI will also hit the economic growth and therefore will impact several sectors of the economy. We expect the loan impairment (slippages +restructured loans) to remain high in FY2014, especially, in case of public sector banks (PSBs).
View-sector gets derated; avoid banks with weak deposit profile
The RBI in its forthcoming monetary policy review (July 30) is likely to maintain a hawkish stance. Though it is difficult to predict the timing of withdrawal of RBI's curbs, we believe it is likely to be there for some time (two to three months), which will have a collateral damage to the economy and the banking sector. Consequently, 
  • We have turned bearish on banks like Corporation Bank, IDBI Bank and Andhra Bank (despite low valuations), which have relatively weak deposit profile.
  • We see scope for considerable downward revision in earnings and the price target of Yes Bank, Bank of India, Punjab National Bank, Allahabad Bank and Union Bank. Avoid bottom fishing in the new private sector banks space.
  • HDFC Bank is the safe heaven among private banks; State Bank of India is better placed among the public sector banks.
 

 
VIEWPOINT
Hero MotoCorp
Demand pressure to sustain in near term
Results highlights
  • Hero MotoCorp Ltd (HMCL) Q1FY2014 results were broadly in line with our estimate.
  • The realisation/vehicle at Rs39.502 per vehicle was 3.8% below our estimate on account of higher proportion of the entry-level bikes. The contribution/vehicle at Rs10,928 per vehicle was 5.5% lower than our estimate due to a poor mix.
  • However, the higher material costs were offset by a lower other expenditure. The other expenditure/sales at 9.2% was 90 basis points lower than our estimate. HMCL reported an operating profit margin (OPM) of 14.9%, which is 40 basis points higher than our estimate.
  • However, a higher taxation impacted the profit. HMCL reported a profit of Rs548.6 crore as against our estimate of Rs567.7 crore.
Conference call highlights
Maintains two-wheeler industry growth forecast of 7-8% in FY2014

HMCL has maintained the two-wheeler industry growth forecast of 7-8% in FY2014. It expects H1FY2014 to remain lacklustre (the industry declined by 0.8% in Q1FY2014). HMCL is banking on the festive season to boost the demand in H2FY2014. Also, the low volumes in the corresponding period of the last year (October 2012 to March 2013) have created a favourable base for the industry in H2FY2014.
Competition to intensify; HMCL likely to loose market share
With the launch of products at lower price points, Honda Motorcycles and Scooters India (HMSI) is planning to gain market share in the domestic market. It recently launched Activa-I in the scooter segment and Dream Neo (HMSI's cheapest bike in India) in the 100cc segment to enhance its presence. Further, with HMSI expanding its capacity, we expect HMSI to gain market share. Also, Bajaj Auto Ltd (BAL) has planned aggressive product launches (six motorcycles in the executive segment and two bikes in the premium segment) to gain market share in the motorcycle space. HMCL being the market leader is likely to loose market share given the strong product pipeline planned by the competition.
Exports to gain traction with entry into new markets
HMCL expects the export volumes to pick-up as the company enters new markets for exports. Recently, HMCL commenced operations in Guatemala and Honduras in the Latin American market and Kenya and Ivory Coast in the African market. It plans to commence exports in newer markets such as Peru and Ecuador from August 2013, which would further boost the export volumes. HMCL plans to achieve volumes of 3.5 lakh units from export operations in FY2014. It has maintained a target of 1 million two-wheeler sales from exports by FY2017. 

Valuation
For HMCL, we have assumed a 6% volume growth for FY2014 given the expectation of a mid-single digit growth for the industry. The margin is expected to decline marginally on account of the rupee's depreciation against the dollar. We have assumed a margin of 14.5% and 14.7% for FY2014 and FY2015 respectively. For FY2014, HMCL is likely to witness an increased tax rate on account of a reduction in tax benefit from its Uttarakhand plant and an increase in the surcharge in the Union Budget. We expect earnings per share (EPS) estimates of Rs108/share and Rs138.3/share for FY2014 and FY2015 respectively. We have a Neutral view on the stock. 

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Regards,
The Sharekhan Research Team
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Fw: Top Performing Debt Funds

 
 

IIFL
Dear Investor,
We are delighted to inform you about our credentials in MF Research. There are more than 1000 equity funds and 1000 plus debt funds with varying degree of performance. Fund with the same theme also deviates to a large extent in returns. Selecting suitable fund requires thorough analysis of various parameter.
Based on our research analysis please find herewith the Top performer's category wise.
Long term Income / Gilt Fund
Scheme Name Corpus (Cr.) Month End NAV 6 Months 1 Year 3 Years
IDFC SSIF-Invest-F(G) 3236.8151 Jun-13 13.1851 9.6040 12.7626 N.A
Reliance Dynamic Bond(G) 8759.1796 Jun-13 16.3346 9.9966 12.3866 9.9220
SBI Dynamic Bond(G) 7658.6546 Jun-13 15.2832 10.2114 12.8003 11.0071
SBI Magnum Income(G) 6219.7995 Jun-13 30.2152 10.4705 13.4784 9.9152
UTI Bond Fund(G) 3482.4795 Jun-13 36.3366 10.6177 12.7244 10.1645







Short term Income / Gilt Fund
Scheme Name Corpus (Cr.) Month End NAV 6 Months 1 Year 3 Years
Birla SL Medium Term Fund(G) 1112.2673 Jun-13 14.3400 12.7032 11.9019 10.0447
Birla SL ST Opportunities Fund(G) 867.7625 Jun-13 19.3577 12.2550 12.0607 10.0782
JPMorgan India ST Income(G) 1290.8737 Jun-13 13.1578 9.1633 9.6566 8.9612
Morgan Stanley ST Bond-Reg(G) 565.5149 Jun-13 13.6525 9.8061 10.2377 8.9115
Templeton India Low Duration Fund(G) 2357.5612 May-13 13.0555 9.5056 9.6981 N.A







Ultra Short term / Liquid Fund
Scheme Name Corpus (Cr.) Month End NAV 6 Months 1 Year 3 Years
ICICI Pru Flexible Income-Ret(G) 9402.3892 Jun-13 134.3749 8.4400 8.4287 8.1799
JM High Liquidity Fund(G) 2687.7976 Jun-13 32.7316 8.6416 8.9010 8.7836
Kotak Floater-LT(G) 4518.6080 Jun-13 19.1550 9.0992 9.3671 8.9156
Kotak Floater-ST(G) 2116.5332 Jun-13 1967.8136 8.7467 9.0220 8.8316
Tata Floater(G) 3487.5053 Jun-13 1801.0953 8.9292 9.1110 8.9387
Source: ACEMF Based on Data as on: 11th July, 2013
DEMO
Online Investment in Mutual Fund
Disclaimer :
This report is for information purposes only and does not constitute an offer, solicitation or advertisement with respect to the purchase or sale of any Mutual Fund Scheme and no part of it shall form the basis of or be relied upon in connection with any contract or commitment whatsoever. This report has been prepared from the publicly available information. Any person who subsequently subscribes for any Mutual Fund Scheme issued by the AMC must rely solely on the publicly available information including the Offer Document issued in connection with the Issue on the basis of which alone investment can be made. In addition, investors should pay particular attention to the section of the Offer Document entitled "Risk Factors". Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
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Customer care: 022 40071000
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Call Trade line
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Thursday, July 18, 2013

Fw: INVEST Online in Secured NCD Shriram Transport Finance Limited Company to earn interest upto 11.15% p.a*

 
STFC Mailer
 
IIFL
Invest Now
Shriram Transport Finance Company Limited
Shriram Transport Finance Company (STFC) was established in 1979 and has a long track record of over three decades in the commercial vehicle financing industry in India. STFC has been registered as a deposit-taking NBFC with the RBI since 4th Sept '2000 under Section 45IA of the Reserve Bank of India Act, 1934.
STFC is a part of the Shriram group of companies which has a strong presence in financial services in India, including commercial vehicle financing, consumer finance, life and general insurance, stock broking, chit funds and distribution of financial products.
Why to invest in Shriram Transport Finance Company Limited (NCD)
»
The NCDs offer an opportunity to lock in at an interest rate of 11.15% p.a. for 5 years.
»
Healthy credit rating of '(CARE) +' and 'CRISIL AA/Stable'.
»
The bonds would be listed on both NSE & BSE to provide liquidity to the investors.
»
Tax will not be deducted at source from interest payable on such NCDs held by the investor (in case of resident Individuals and HUFs for NCDs held in physical form), if such interest does not exceed Rs.5,000 in any financial year.
»
Wealth Tax is not levied on investment in Bonds under Section 2 (ea) of Wealth-Tax Act,1957.
»
As per provisions under section 2 (29A) of the I.T. Act, read with section 2 (42A) of the I.T. Act, a listed Bond is treated as a long term capital asset if the same is held for more than 12 months immediately preceding the date of its transfer. Under section 112 of the I.T. Act, capital gains arising on the transfer of listed Bonds shall be taxed @ 10% without indexation;
INVESTMENT DETAILS (For details, please refer Issue related all documents)
Series I II III IV V
Face Value/Issue Price (`) per NCD Rs. 1,000 Rs. 1,000 Rs. 1,000 Rs. 1,000 Rs. 1,000
Frequency of Interest Payment A n n u a l A n n u a l Monthly Not Applicable Not Applicable
Coupon (% Per annum) (A) 9.65% 9.80% 9.40% Not Applicable Not Applicable
Additional Incentive on Coupon (% Per annum) on Any Record Date -(B) NCD Holders who are Individuals NCD Holders who are Non Individuals NCD Holders who are Individuals NCD Holders who are Non Individuals NCD Holders who are Individuals NCD Holders who are Non Individuals Not Applicable Not Applicable
1.25% Nil 1.35% Nil 1.23% Nil
Aggreate of Coupon and Additional Incentive on any Record Date (% per annum)= (A) + (B) NCD Holders who are Individuals NCD Holders who are Non Individuals NCD Holders who are Individuals NCD Holders who are Non Individuals NCD Holders who are Individuals NCD Holders who are Non Individuals Not Applicable Not Applicable
10.90% 9.65% 11.15% 9.80% 10.63% 9.40%
Tenor Thirty Six Months Sixty Months Sixty Months Thirty Six Months Sixty Months
Minimum Application (No.) 10,000/- (10 NCDs) across all series taken individually or collectively
Disclaimer:
The information contained herein is confidential and is intended solely for the addressee(s). Any unauthorized access, use, reproduction, disclosure or dissemination is prohibited. This report is for information purposes only and does not constitute or form part of and should not be construed as, any offer for sale or subscription of or any invitation to or advertisement for offer to buy or subscribe for any security/bonds of Shriram Transport Finance Company Limited ("STFC/The Company") and no part of it shall form the basis of or be relied upon in connection with any contract or commitment whatsoever. This report has been prepared from the publicly available information.. The information and opinions on which this communication is based have been complied or arrived at from sources believed to be reliable and in good faith, but no representation or warranty, express or implied, is made as to their accuracy, correctness and are sub! ject to change without notice. IIFL - India Infoline Ltd. and/ or its clients may have positions in or options on the securities mentioned in this report or any related investments, may affect transactions or may buy, sell or offer to buy or sell such securities or any related investments. Neither IIFL – India Infoline Ltd. nor any of its affiliates shall assume any legal liability or responsibility for any incorrect, misleading or altered information contained herein. The material/ charts contained in this document are based on information that is publicly available, including information developed in-house. The report / recommendations contained in the report are the personal views and opinions of the author and are not to be construed as advice. IIFL or any of its affiliates or employees shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. The recipient alone shal! l be responsible for any decision taken on the basis of this report. A ny person who subsequently subscribes for any bonds issued by the Company must rely solely on the publicly available information including the Prospectus issued in connection with the Issue on the basis of which alone subscription for the debentures may be made. The recipients of this report should rely on their own investigations; seek appropriate professional advice, before dealing and or transacting in any of the products/ instrument referred to in this report. Products/ Instruments are subject to market risks and returns may fluctuate depending on various factors. Past performance of the products/instruments does not indicate the future prospects & performance thereof. Such past performance may not be sustained in future. The investors shall obtain, read and understand Prospectus and should pay particular attention to the section of the Prospectus entitled "Risk Factors".and/or any other relevant.
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Customer care: 022 40071000
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Tuesday, July 16, 2013

Fw: Investor's Eye: Update - CMC, NIIT Technologies

 
Investor's Eye
[July 16, 2013] 
Summary of Contents
 
 
STOCK UPDATE
CMC
Recommendation: Buy
Price target: Rs1,500
Current market price: Rs1,302
Price target revised to Rs1,500 
Result highlights 
  • Performance below expectations: For Q1FY2014, CMC has reported a 7.1% drop in its revenues to Rs486.6 crore, which is lower than our expectation of Rs513.4 crore. The decline in the top line was higher than expected because of a slower than expected growth in the system integration (SI) segment during the quarter. Despite the rupee's tail wind, the SI business grew by only 7.8% quarter on quarter (QoQ) in Q1FY2014 after a 13.9% sequential decline in Q4FY2014. On the other hand, the performance of the customer service (CS) business (whose revenues fell by 38% QoQ) and the information technology enabled services (ITES) business (whose revenues grew by 4.3% QoQ) was broadly in line with our expectations. 
    • The revenues of the services business grew by 5.3% QoQ (90% of the total revenues as against 79.4% in Q4FY13) whereas the revenues of the equipment business plunged by 55% QoQ (after a strong growth of 283% QoQ in Q4FY2013; 10% of the total revenues).
    • The revenues from the international business rose by 8.7% QoQ to Rs314.1 crore driven by currency tail winds whereas the domestic revenues dropped by 26.5% to Rs172.5 crore on account of a fall in the revenues of the hardware business.
  • Margins remain stable; management expects improvement in coming quarters: The operating profit margin (OPM) remained broadly stable at 15.8% against 15.6% in Q4FY2013. The quarter's margin performance was below our expectations (we had expected an OPM of 16.8%). The underperformance can be attributed to a higher than expected increase in the sub-contracting cost (which rose by 18.8% QoQ driven by the execution of a higher number of onsite projects) and a lower than expected contribution from the high-margin lease rental segment. Despite improvement in the currency tail wind, the management has maintained its margin corridor of 16-17% for FY2014. 
  • Net income declined by 13% QoQ: The quarter's other income was significantly higher (up 148% QoQ) at Rs10.1 crore on account of a sale of property that generated Rs4.2 crore during the quarter. Further, the effective tax rate rose by 1,200 basis points QoQ to 34.4% on account of Rs9.6 crore dividend distribution tax on the dividend received from CMC Americas. The net income for the quarter fell by 13% QoQ to Rs53.1 crore, which is lower than our expectation of Rs64 crore. 
Valuation: A slower than expected ramp-up in the performance of the key revenue-earning segments (SI and ITES) has upset CMC's growth trajectory tapering off its year-on-year (Y-o-Y) revenue growth rate to single digits in Q1FY2014 (the lowest in 12 quarters). The delay in improving in the revenue mix (onsite revenues still contribute over 75% of total revenues) has led to cost pressure and restricted any meaningful improvement in the margin. Nevertheless, the company's management indicated this quarter's performance was a quarterly aberration. It expects the growth momentum to improve in the quarters ahead and the revenue growth to be higher than the industry average in FY2014. In view of the lower than expected performance and increased tax rate assumptions, we have reduced our earnings estimates for FY2014 and FY2015 by 9.6% and 9.2% respectively. Consequently, we have reduced our price target to Rs1,500. From a longer-term perspective, we remain positive on CMC, given its strong earnings visibility led by its "joint go to" market strategy with Tata Consultancy Services, the successful traction in its products and solutions, and its proven expertise in the projects of the domestic government. We maintain our Buy rating on the stock with a revised price target of Rs1,500. 
 
NIIT Technologies
Recommendation: Hold
Price target: Rs305
Current market price: Rs261
Soft quarter 
Result highlights
  • Soft quarter: For Q1FY2014, the numbers of NIIT Technologies Ltd (NTL) were below our expectation on both the top line and bottom line front. Though seasonally Q1 has always been a soft quarter for NTL, but overall the headline numbers coupled with an increase in the DSO days do not augur well for re-rating the company's stock, at least in the near term.
  • The revenues were up by 0.9% quarter on quarter (QoQ) to Rs541.9 crore, which is lower than our expectation of Rs549.9 crore. Excluding hardware revenues of Rs59 crore, the revenues were down by 5.3% QoQ to Rs482.9 crore.
  • The operating profit margin (OPM) for the quarter declined by 200 basis points to 14.4% (which is tad lower than our estimate of 14.9%). The decline in the margin was largely attributed to the annual wage hikes effective during the quarter. The management expects the margin to improve in the coming quarters.
  • For the quarter, the other income stood at Rs20.6 crore as against a loss of Rs1.4 crore in Q4FY2013. The significant jump in the other income was on account of Rs17 crore foreign exchange (forex) translation gains against a loss of Rs5.9 crore in Q4FY2013. Further, the effective tax rate has gone up substantially to 35% attributed to the dividend distribution tax of Rs9.4 crore. The net income for the quarter was down by 6% QoQ to Rs53.2 crore (our estimate was Rs56.9 crore).
  • Working capital intensifies, DSO days touched 98 days: NTL's focus on safeguarding the revenue predictability with increasing contribution from the government business (13% of the total revenues, up from 8% in Q1FY2013) has started taking toll on its cash flows. For the quarter, the DSO days went up by 16 days to reach 98 days at the end of the quarter (highest in the last 11 quarters). Thus, the cash and cash equivalents declined by Rs85 crore QoQ to Rs247.9 crore. The management acknowledged that the higher government contracts have impacted the DSO days. Further, with two government contracts on anvil (AP Finance, already started, and Airports Authority of India [AAI], to commence from Q2FY2014), the pressure on DSO days is unlikely to subside in the near term. Though the management expects that the newer management projects will have a better billing cycle but we remain sceptical on that. 
  • Valuation: Absence of any meaningful improvement in the earnings performance coupled with a changing mix of business is holding up the case for re-rating of NTL. Though we still see NTL among the few mid-cap information technology (IT) companies, which have rich potential for earnings improvement, the wait for improvement seems to be getting longer than anticipated earlier. We have revised our currency estimates and tweaked our earnings estimates for FY2014 and FY2015E. At the current market price (CMP) of Rs260, the stock is trading at 6.2x and 5.6x its FY2014 and FY2015 earnings estimates respectively. We maintain our Hold rating on the stock with a price target of Rs305.
 

 Click here to read report: Investor's Eye