STOCK UPDATE HCL Technologies
Cluster: Apple Green
Recommendation: Buy
Price target: Rs419
Current market price: Rs384
Wins new deals; momentum continues in IMS space -
Wins new deals in IMS space: HCL Technologies (HCL Tech) has announced a couple of deals in the last two months and that too in the fast-growing infrastructure management services (IMS) space. The company has bagged deals from Merck & Co. (MSD) and Singapore Exchange (SGX). The USD500 million deal with MSD is broader in terms of services and include software-led IT solutions, remote infrastructure management, engineering and business and knowledge process outsourcing services whereas the deal from SGX worth USD110 million purely focuses on providing infrastructure management services. -
Impressive CQGR in IMS segment; HCL continues its efforts to strengthen its position: We highlight in this note that HCL Tech?s IMS segment has recorded an impressive compounded quarterly growth rate (CQGR) of 16.5% for the last four quarters and the segment?s revenue contribution to the company?s total revenues at 22% is much higher than that of its peers (Infosys Techologies?7.2% and Tata Consultancy Services? 8.4% and almost at par with Wipro?21.6%). In its latest effort to strengthen its position in the IMS space, the company has announced to set up a multilingual service desk facility to support its global and local customers in Brazil. -
IMS space to witness strong traction: We believe that the traction for new deals in the IMS space is likely to remain strong as the companies are increasingly focusing on reducing their infrastructure cost. With stronger position in the IMS space vis-?-vis its peers, we believe HCL Tech is well placed to grab the opportunities (worth USD40 billion of contracts are due for renegotiations as per TPI) going forward. -
No impact from Europe crisis as yet: As of now we do not see the European crisis impacting HCL Tech?s demand scenario in a major way. The company?s deal pipeline seems quite strong and has a greater focus on the US and the Asia Pacific. -
Maintain Buy: We maintain our Buy recommendation on the stock with a price target of Rs419. HCL Tech looks attractive on the valuation front on the back of widened valuation gap compared to its peers (the stock is trading around 23% discount to its peers). At the current market price, the stock is trading at 15.7x FY2011 earnings estimate and 14.1x FY2012 earnings estimate. IDBI Bank
Cluster: Cannonball
Recommendation: Buy
Price target: Rs169
Current market price: Rs117
Capital infusion to fund growth -
According to media reports, the government has approved the infusion of Rs6,211 crore worth of funds into five public sector banks including IDBI Bank. Of the total funds, media reports state that IDBI Bank could receive around Rs3,100 crore through preferential placement of equity. The price at which the capital will be infused as well as when it will be received however is not yet known. -
The much-needed capital infusion comes as a relief to the bank and will help it achieve its credit growth targets while reducing its dependence on high-cost deposits, subsequently leading to an improvement in the cost of deposits. We continue to remain optimistic on the future prospects of the bank on the back of its improving operational efficiency and robust business growth. At the current market price of Rs117, the bank trades at 6.1x its FY12E earnings per share (EPS) and 1x its FY12E adjusted book value. We maintain our Buy recommendation on the stock with a price target of Rs169.
VIEWPOINT Murli Industries
Building on cement business
A Nagpur based company Murli Industries was established around 19 years back in 1991. Launching its operations with a solvent extraction plant, the company, as part of business strategy, diversified into paper manufacturing and cement business. The current cement production capacity stands at 3 million tonne per annum (MTPA), which company plans to scale up to 9MTPA by 2013. | | | |
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