Reiterate ‘buy’ on Bajaj Auto – TP maintained at Rs.1530
Company has reported better than expected 2QFY11 result. EPS at Rs.23.6 is higher by 57% y-y.
Operating profit margin at 20.7% was up by 60bps over the street estimate.
Better than expected sales of Pulsar and Discover 150 coupled with domestic and export price hike helped the company to produce better than expected numbers.
Monthly average sales of 36000 Discover 150 per month as against the company’s guidance of 30000 vehicles per month.
Overall sales guidance of 4 million vehicles for the full year is achievable if the current momentum of sales could be maintained throughout the year.
Company has reiterated operating profit margin at 20%. This appeared to be very conservative and the margin is likely to be better than company’s guidance. Considering the recent price hike of 1-25 in October 2010.
EPS numbers for FY11 and FY12 would be better by 9% and 12% respectively over the street estimates.
The target price is maintained at Rs.1530, which is at 15 multiple of FY12 expected earnings.
Buy call maintained on Yes Bank – TP hiked to Rs.390
Buy recommendation on Yes Bank has been reiterated with an upward revision in target price to Rs.390, the current market price is at Rs.352 range.
The bank has reported excellent numbers for 2QFY11 with robust EPS growth of 34% y-y, which appears to be well ahead of street estimates.
Better EPS numbers are mainly due to 86% y-y increase in loan book in the second quarter.
The bank could maintain net interest margin (NIM) at 3% and hopeful of maintaining NIM throughout the year.
About 70 – 75% of 80 new branches are expected to come up in tier 1 cities, which would significantly increase branch density and may help to improve CASA ratio by 2QFY12.
FY11 fee income growth is expected at 36% y-y while loan book growth is expected at 52%
EPS growth is expected at 28% on expanded equity for FY11 on 53% increase in loan book. NIM for the whole year is expected at 2.9%.
The target price of Rs.390 is at 3.1 multiple of FY12 adjusted book value estimate and at adjusted ROE of 20.6%.
Hold on HCL Tech – TP Rs.450
HCL Technology has been downgraded to ‘hold’ from the earlier ‘buy’ call with a target price of Rs.450 over one year. The downgrade is mainly due to margin pressure.
Despite 9% growth in USD revenue in 1QFY11(July – September), operating profit margin declined by 230 bps and EPS is lower than the street estimate.
Pressure on profit margin is mainly attributed to higher than expected employees cost.
Company’s focus areas such as infrastructure services, enterprise applications and BPO are on a recovering path. However, concern over margin pressure remains.
Profit margin is unlikely to improve in the coming quarters because of unfavorable forex market conditions (hardening of the Rupee)
The stock is downgraded to hold from the earlier buy call with a revised target price of Rs.450. Investors may also consider partly booking profit in the counter and a switch over to Infosys.