Research Notes – October 22, 2010

Retain ‘buy’ on Persistent Systems; TP revised at Rs.530
 2QFY11 revenue is in line with market expectations and EPS is better than estimates due to better other income and low tax outgo.
 USD revenue growth at 2.6% q-q is lower when compared to its peers’ 9 -12% growth q-q . However, USD growth rate at 41% y-y looks healthy.
 Continues its focus on four core areas – cloud computing, mobility, collaboration and analytics- and its recent partnership with two key customers may lead to more revenue in cloud area.
 Better demand is leading to 3-5% higher pricing from existing contracts renewals and pricing would be higher for new contracts as well.
 It seems that there is vast potential for company’s business in the long term.
 Company is expected to meet its 33% USD revenue growth expectation for FY11 and may comfortably beat its USD 155 million target for 1HFY11.
 Revenue growth is expected at 25.8% CAGR over FY10 -13 and EPS is expected to grow at 12.5CAGR during the same period.

Buy call maintained on Indiabulls Real Estate – TP Rs.246
 Company has reported strong 2QFY11 revenue at Rs.320 crore, which is in line with street estimates. It seems that the company could achieve its revenue target of Rs.1020 crore for FY11 and the aggressive revenue target of Rs.1100 crore, as estimated by the street.
 Operating profit margin improved to 33% from 22% as a result of higher average sales price and Panvel project revenue recognition.
 Sold about 1.84 million sq ft in 2QFY11 as against 0.78 million sq ft in the first quarter.
 Contracted sales value for 2QFY11 is Rs.3100 crore as against cumulative contracted sale of Rs.1720 crore over the last two years. It seems that more than 80% of sales is derived from the luxury projects of the company in Mumbai.
 The management has plans to demerge power business of the company by divesting its 58% stake in IB Power. This will make it a pure real estate player.
 The target price is revised to Rs.246 over one year considering improved performance of the company.

Maintain ‘reduce’ on ACC – Price may drop to Rs.637 range
 Reiterate reduce recommendation on ACC and the price of the stock is expected to drift lower to Rs.637 range over the next one year term.
 The company has reported disappointing performance for the third quarter CY2010.
 Sales revenue at Rs. 1760 crore for the quarter is 15.3% lower y-y and operating profit at Rs.165 crore declined by 74.8% y-y. PAT at Rs.86 crore is lower by 79.1% y-y.
 Average price realization declined by 11.6% q-q.
 Contraction of volume due to shut down of Wadi plant, disruption of operations in Chanda plant due to floods, unavailability of fly ash in north India. This coupled with high raw material cost adversely affected profitability and margin of the company.
 Expansion plans in wadi and Chanda plants are nearing completion. Average price realization from south India may also see some improvement. Despite all this, the company is expected to report weak performance for the coming quarter as well and the ‘reduce’ recommendation is maintained in the stock. At the current value of Rs. 980 plus, the stock appears overvalued.

Source: Geojit

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