Hold KPIT Cummins; target of Rs 159: Asit C. Mehta - Moneycontrol.com -

Hold KPIT Cummins; target of Rs 159: Asit C. Mehta - Moneycontrol.com -: "Asit C. Mehta has recommended hold rating on KPIT Cummins Infosystems with a target of Rs 159 in its October 11, 2010 research report.

“KPIT, incorporated in 1990 by group of Chartered Accountants, provides IT services primarily to manufacturing sector. The company has team of around 5300 professionals serving 144 clients across geographies.”"

KPIT has entered into a joint venture with Bharat Forge for producing plug-in parallel hybrid solution (Revolo) primarily for passenger car. The company believes that hybrid solution will increase efficiency of petrol and diesel engine vehicles by around 60% in urban areas around 45and % in semi-urban areas and highways. KPIT has guided that J.V. will achieve revenue of around Rs 3-5 billion in FY12E. However, our analysis from buyers’ point of view suggest that hybrid solution will take around 4 years to achieve breakeven with annual running of 16,000 kms; whereas factory fitted CNG kit takes around 2 years with annual running of 11,000 kms to achieve breakeven.”

“We initiate coverage on KPIT Cummins Infosystems (KPIT) with “Hold” recommendation. We are valuing the company at Rs 159 per share by assigning 12 P/E multiple (i.e 40% discount to Infosys’s target P/E multiple of 20) to its FY12E EPS of Rs 13.3. However, we have not considered any revenues from Revolo because it is difficult to comprehend potential demand for Revolo in light of relatively higher payback period compared to CNG kit and operational issues like charging of batteries. Hence, we like to wait till launch of the product in market and initial demand trend for the same before considering any revenue."

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Add Bharat Heavy Electricals; target of Rs 2572: IIFL - Moneycontrol.com -

Add Bharat Heavy Electricals; target of Rs 2572: IIFL - Moneycontrol.com -: "IIFL is bullish on Bharat Heavy Electricals (BHEL) and has recommended add rating on the stock with a target of Rs 2572 in its October 11, 2010 research report.

“Bharat Forge-Alstom (BFA) JV has emerged as the lowest bidder (L1) to supply supercritical turbine-generators for the 7.2GW (11x660MW) NTPC-DVC contract, edging out BHEL. As L2, BHEL will not lose out on volumes, because it still gets four sets as compared to five sets for L1. JSW-Toshiba JV as L3 gets two sets. But, the price point is determined by the need to match L1 and not by internal margin thresholds. The 3.3GW order provides BFA reasonable volumes to kick-start operations. Industry sources indicate that BFA would continue to bid competitively. Domestic competition in supercritical turbines would only increase, as L&T might bid for new projects more aggressively to make up for the lost opportunity in this tender.”"

“Prima-facie, the L1 pricing does not seem aggressive at Rs 13m/MW. Both BHEL and L&T have earlier won turbine orders at lower prices. Given differing specifications across tenders, it is difficult to make an apple-to-apple comparison. In the current order, BHEL’s margins would be lower than its own expectations, as it has to match L1. EBITDA margins post FY12 would be largely determined by gross margins, as growth decelerates and fixed costs move in line with revenues. Add Bharat Heavy Electricals with a 12 month target of Rs 2572,” says IIFL research report.

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Reduce Mahindra Satyam: Emkay Global Financial Services - Moneycontrol.com -

“Mahindra Satyam (MS) recently disclosed FY09 and FY10 financials which restores normalcy and sets a base for expectations. However in our view, MS faces a staunch task as it tries to rebuild itself from the ashes driven by (1) weaker competitive positioning (arising from loss of key clients, employees and in some cases in it’s tradional strength areas like engineering services, enterprise solutions), higher employee attrition (currently an industry wide issue however our channel checks indicate that MS was forced to offer higher than peer wage increments in Jan’10 at 25-AA30% in order to retain talent, which should prevent significant margin improvement as well) . Although co has filled in the vacant positions through internal promotions and senior appointments from the parent/Mahindra group; we believe that company faces consolidation before targeting growth ahead.”

“We build in a strong EBITDA margin performance for Mahindra Satyam as we expect them to expand to 15.2% and 17.1% in FY11 and FY12 respectively (V/s 8.3% in FY10) which we believe itself might be a stiff task given the growth pangs that MS faces (expect revenues to decline by ~6% in FY11) as well as margin headwinds emerging from wage increments (our channel checks indicate that MS hiked salaries by ~25-30% across the board in Jan’10 in order to address employee attrition)”

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Indian Card Clothing Company – Buy

The Hindu Business Line : Indian Card Clothing Company – Buy: "Investors with medium-term perspective can consider buying the stock of Indian Card Clothing Company (Rs 175.3). Since its multi-year low of Rs 41 recorded in March 2009, the stock has been on an intermediate-term uptrend shaping higher peaks and troughs. This up trend-line is intact. After a medium-term corrective downtrend from its January 2010 peak of Rs 201, the stock found support at Rs 130, significant long-term support, in late May and reversed higher. The stock found twin support around Rs 150 (another key long-term support and intermediate-term up trendline) last week and bounced up 16 per cent, reinforcing the uptrend. We notice that there has been an increase in volume over the past four trading sessions. The stock recently breached its moving average compression (21, 50 and 200-day moving average). This further strengthens the uptrend. The daily relative strength index is featuring in the bullish zone and weekly RSI has entered in to this zone. Besides, the daily moving average convergence divergence oscillator has signalled a buy and has re-entered in the positive territory and weekly MACD is hovering in this territory implying upward momentum. Taking the above facts into consideration, we are bullish on the stock from a medium-term perspective."



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