Tuesday, January 14, 2014

Investor's Eye: Update - NIIT Technologies, CMC; Mutual Gains - Sharekhan's top equity mutual fund picks, Sharekhan's top SIP fund picks

 
Investor's Eye
[January 14, 2014] 
Summary of Contents

STOCK UPDATE

NIIT Technologies
Recommendation: Buy
Price target: Rs540
Current market price: Rs388

Buy maintained; price target revised to Rs540

  • NIIT Technologies Ltd (NTL) revenues in Q3FY2014 were flat quarter on quarter (QoQ) at Rs 587.3 crore (against our estimate of Rs603 crore). Nevertheless, the revenue quality has improved with a drop in the hardware revenues component, whereas the core services revenue increased by 4.3% QoQ (3.6% QoQ in constant-currency terms). 

  • The margin surprised us positively with a 120-basis-point quarter-on-quarter (Q-o-Q) improvement at 16.3% led by a drop in the hardware revenue and a decline in the hedging loss. The net income was down by 14.9% QoQ to Rs53.1 crore (against our estimate of Rs59.1 crore), on account of the foreign exchange (forex) loss to the tune of Rs7.9 crore and lower treasury gains. 

  • The fresh order intake of $377 million and the 12-months executable order book at $265 million was at an all time high and this augurs well for the company's revenue visibility. The management expects the margins to pick up further in FY2015 and FY2016 (100 basis point improvement per year).

  • We have tweaked our EPS estimates for FY2015 and FY2016E by 3.8% and 5.5% respectively, on account of the change in the margin assumptions. The two key re-rating triggers for the company have started to play out: (a) an improvement in the quality of earnings; and (b) a pick up in the margins trajectory. We believe that NTL is well poised for a further re-rating. We now value NTL at 10x FY2016 EPS and consequently increase our 12-months price target to Rs540 (39% upside) and maintain it as our top pick in the IT mid-cap space. 

 


CMC
Recommendation: Hold
Price target: Rs1,800
Current market price: Rs1,540

In line with performance, margins surprises positively

  • CMC Limited (CMC)'s revenue for Q3FY2014 was broadly in line with our expectations at Rs561 crore, a flat quarter-on-quarter (Q-o-Q) growth and a YoY increase of 13.8%. The margin surprised us positively at 16.2% (against our estimate of 15.3%). The improvement in the margin was led by an offshore shift (80 basis points) and a decline in the sub-contracting cost (down by 7% quarter on quarter [QoQ]). The net income increased by 4.8% QoQ and 15.5% year on year (YoY) to Rs70.5 crore. 

  • In the operating metric performance, the international revenue was down by 2.3% QoQ (which accounts for 65.7% of the revenue) and the CMC Americas revenue declined by 1.6% QoQ. The revenue through Tata Consultancy Services (TCS)'s "joint go-to-market strategy" contributed to 57% of the revenue as compared to 59% in Q2FY2014. The services revenue decreased by 3.2% QoQ, whereas the equipments business increased by 44% QoQ. In the segment performance, systems integration (SI) decreased by 1.5% QoQ and the IT-enabled services (ITES) decreased by 13.6% QoQ, whereas the customer service (CS) segment witnessed a sharp jump of 16% QoQ. 

  • In our last update, we had mentioned that CMC's stock performance will take some breather in the near term after a sharp run-up in the last one month (the stock has corrected 10% after the Q3FY2014 result) and recommended investors to wait for a better entry level. We continue to remain constructive on CMC's growth prospects and earnings predictability. We would now recommend investors to accumulate the stock in the event of a further fall in the price. We maintain our Hold rating on the stock with a price target of Rs1,800 (17% upside). 



MUTUAL GAINS

Sharekhan's top equity mutual fund picks

Large-cap funds Mid-cap funds Multi-cap funds
ICICI Prudential Focused Bluechip Equity Fund - Ret - Mirae Asset Emerging Bluechip Fund SBI Magnum Global Fund 94
Birla Sun Life Top 100 Fund SBI Emerg Buss Fund ICICI Prudential Discovery Fund 
SBI Magnum Bluechip Fund SBI Magnum Midcap Fund Axis Equity Fund 
Tata Pure Equity Fund - Plan A  Franklin India Prima Fund Quantum Long-Term Equity Fund
Kotak 50 IDFC Sterling Equity Fund  - Reg Tata Equity Opportunities Fund - Plan A
Indices Indices Indices
BSE Sensex BSE MID CAP BSE 500
Tax-saving funds Thematic funds Balanced funds
Axis Long Term Equity Fund ICICI Prudential Exports and Other Services Fund ICICI Prudential Balanced 
BNP Paribas Tax Advantage Plan Birla Sun Life India GenNext Fund Tata Balanced Fund - Plan A
Tata Tax Saving Fund - Plan A Reliance Media & Entet Fund Canara Robeco Balance
SBI Magnum Tax Gain Scheme 93 Franklin Build India Fund SBI Magnum Balanced Fund 
HDFC Long Term  Advantage Fund  Canara Robeco FORCE Fund - Reg FT India Balanced Fund
Indices Indices Indices
CNX500 S&P Nifty (CNX Nifty) Crisil Balanced Fund Index

Fund focus

  • Axis Long-term Equity fund

 

Sharekhan's top SIP fund picks

Large-cap funds Multi-cap funds 
SBI Magnum Bluechip Fund SBI Magnum Global Fund 94 
Birla Sun Life Top 100 Fund ICICI Prudential Discovery Fund 
Birla Sun Life Frontline Equity Fund - Plan A SBI Magnum Multiplier Plus 93
Tata Pure Equity Fund - Plan A  Tata Equity Opportunities Fund - Plan A
Kotak 50  Quantum Long-Term Equity Fund 
BSE Sensex BSE 500
Mid-cap funds Tax saving funds 
SBI Magnum Midcap Fund BNP Paribas Tax Advantage Plan
Franklin India Prima Fund SBI Magnum Tax Gain Scheme 93
HDFC Mid-Cap Opportunities Fund HDFC Long Term  Advantage Fund
SBI Emerg Buss Fund Reliance Tax Saver (ELSS) Fund
IDFC Sterling Equity Fund  - Reg Tata Tax Saving Fund - Plan A
BSE Midcap CNX Nifty

Fund focus

  • HDFC Long-term Advantage Fund  

Click here to read report: Investor's Eye

 

Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding or having a position in the companies mentioned in the article.

Regards,
The Sharekhan Research Team
 
This e-mail message may contain information, which is confidential, proprietary, legally privileged or subject to copyright. It is intended for use only by the individual or entity to which it is addressed. If you are not the intended recipient or it appears that this mail has been forwarded to you without proper authority, you are not authorized to access, read, disclose, copy, use or otherwise deal with it and any such actions are prohibited and may be unlawful. The recipient acknowledges that Sharekhan Limited or its subsidiaries, (collectively "Sharekhan "), are unable to exercise control or ensure or guarantee the integrity of/over the contents of the information contained in e-mail transmissions and further acknowledges that any views expressed in this message are those of the individual sender and no binding nature of the message shall be implied or assumed unless the sender does so expressly with due authority of Sharekhan . Sharekhan does not accept liability for any errors, omissions, viruses or computer problems experienced as a result of this email. Before opening any attachments please check them for viruses and defects. If you have received this e-mail in error, please notify us immediately at mail to: mailadmin@sharekhan.com and delete this mail from your records. This e-mail message may contain information, which is confidential, proprietary, legally privileged or subject to copyright. It is intended for use only by the individual or entity to which it is addressed. If you are not the intended recipient or it appears that this mail has been forwarded to you without proper authority, you are not authorized to access, read, disclose, copy, use or otherwise deal with it and any such actions are prohibited and may be unlawful. The recipient acknowledges that Sharekhan Limited or its subsidiaries, (collectively "Sharekhan "), are unable to exercise control or ensure or guarantee the integrity of/over the contents of the information contained in e-mail transmissions and further acknowledges that any views expressed in this message are those of the individual sender and no binding nature of the message shall be implied or assumed unless the sender does so expressly with due authority of Sharekhan . Sharekhan does not accept liability for any errors, omissions, viruses or computer problems experienced as a result of this email. Before opening any attachments please check them for viruses and defects. If you have received this e-mail in error, please notify us immediately at mail to: mailadmin@sharekhan.com and delete this mail from your records.

No comments:

Post a Comment