Research Notes – October 27, 2010

Maintain ‘buy’ on Wipro – TP maintained at Rs.500

 2QFY11 result is line with expectations, but high expectations built up by 9 -12% growth reported by its peers made the results to look lackluster.

 3QFY11 guidance of 3.5% -5.5% growth looks encouraging, considering Infosys’ guidance of 4.4%.
 It is expected that Wipro could report 6 – 6.5% q-q growth in the third quarter.

 2QFY11 EBIT margin decline by 240 bps is not surprising given stock grants and promotions were due and some long term forex hedges were to expire leading to lower realized forex rates. It seems that the EBIT margin is likely to recover for the rest of the year.

 Investors concerns are centered around Wipro’s lagging performance for the last quarter. It seems that weak hiring up to September 2009 and high utilization could have left the company supply constrained when the demand picked up.

 FY11 -13 revenue estimates have increased marginally but, EPS is expected to fall marginally due to higher cost projection and stronger rupee.

 Buy is maintained with the same TP of Rs.500 despite the fact that sentiments in the counter would be weak in the near term due to relatively weak 2Q performance. The third quarter is expected to be better and this would be the catalyst in the stock.

Retain ‘buy’ on IRB Infrastructure – TP Rs.323

 Buy call on IRB Infra is retained with a one year target price of Rs.323.

 It seems that 2QFY11 numbers would not be any major surprise as the highway orders were delayed. However, the opportunity seems intact.

 Four new road projects recently started are expected to add considerably to consolidated top line of 2HFY11 and FY12.

 Revenue is expected to decline by 13.9% in FY11 to Rs.3090 crore while PAT is expected at 500 crore, a drop of 9%. The revision is based on 1QFY11 numbers.

 Though there has been delay in highway project awards in 1HFY11, the opportunity is not lost yet. It seems that FY12 would be stronger because of the strong pre –bid activity.

 Company is expected to win Rs.4000 – 5000 crore worth projects each in FY11and FY12. Already won Rs.1200 crore worth projects in FY11.

Hold on OnMobile Global

 Company has reported 2QFY11 revenue at Rs.131.5 crore, an increase of 6.3% q-q. However, operating profit declined by 1.8% q-q due to higher than expected administrative cost.

 EPS at Rs.3.9 looks better than expectation driven by profit on sale stake in Ver Se Innovation.

 Company’s international revenue lags street expectations. International revenue at Rs.29.9 crore is just 1.8% higher y-y.

 OnMobile Global’s presence has increased from 23 countries as on 2QFY10 to 28 countries as on 2QFY11.

 The company has launched its services with Vodafone, Egypt and Telefonica, Mexico. Telefonica deployment is in track and expected to be completed by end of FY11.

 Company is expected to launch 3G services shortly, but this is unlikely to have any major impact on the stock outlook.

 Retain hold recommendation as positives are expected from Telefonica and Vodafone contracts. The target price has been revised from Rs.308 to Rs.360 as the EPS estimates are rolled over from FY11 to FY12.

Source:Geojit

Leave a Comment

Your email address will not be published. Required fields are marked *