Market Outlook POSITIVE . Expect market to open on a positive note on account of global cues. US market was up by half percent with S&P 500 closing at a fresh record high on anticipation that lackluster hiring will push Fed to keep its monetary stimulus in the months ahead. Government is looking to take FX Reserve to USD 300Bn from the current USD 280 Bn which is expected to have positive impact on the market. Yes Bank reported better than expected Q2 result.Maintain Buy with a target price of INR470 (2x FY15 BV). Wiproreported better than expected quarterly results we maintain Buy with target price of INR570, which discounts FY15E EPS by 16x. Research Updates: CAIRN INDIA 2QFY14: PAT in-line despite lower than est. EBITDA led by lower write-offs/tax rate; reiterates guidance of >200kbpd by March-14 v/s 178 now; expect reserve upgrade by end-FY14; Maintain Buy - Cairn India’s 2QFY14 EBITDA at INR35.3b (+2% YoY, +17% QoQ) was below our estimate of INR39.6b, primarily due to lower than expected production and realization at Rajasthan. However, PAT was in-line at INR33.8b (+46% YoY and +8% QoQ), led by lower than expected D,D&A (v/s incl. w/off) at INR6b (est of INR7.4b) and lower tax rate at 2.6% (v/s est of 8.4%) and higher than expected forex gain at INR4.3b (v/s est of INR4b). The stock trades at 5.2x FY14E EPS of 64.2. Our SOTP for CAIRN stands at INR395/sh, implying 19% upside from current levels. Maintain Buy WIPRO 2QFY14: Operationally in line; Above estimate PAT driven by forex gains; Deal momentum continues - Wipro’ 2QFY14 IT Services revenues at USD1,631m grew 2.7% QoQ in line with our estimate of USD1,627m, and guidance of USD1,612-1,642m (re-stated for cross currency impacts). Overall EBIT margin (excluding MTM forex gains) was 18.8%, +70bp QoQ, below our estimate of 20.4%, but this was due to lower realization rate due to hedge losses in the top line. Excluding the volatilities in forex, WPRO managed to offset wage hike impact by operational efficiencies, in line with our expectation. Profit after tax at INR19.4b, grew 19% QoQ (v/s est. of INR18.43b, 13.6%), driven by the MTM forex gains. The stock currently trades at 16.4x FY14E and 14.5x FY15E EPS. We expect WPRO to grow its USD revenues at a CAGR of 9.1% over FY13-15E and EPS at a CAGR of 19% during this period. Our target price of INR570 discounts FY15E EPS by 16x. Maintain Buy. Company description Bharti Airtel is a Largest Telecom Company in India Key highlights •We believe the market reaction could be over-done; even a 10% INR depreciation v/s USD impacts Bharti’s fair value by only ~INR15/sh in the worst case (liabilitiesincrease ~INR59b). •We analyze four past instances when stock price initially declined 8-19% due to concerns on INR depreciation but thereafter recouped, on average, ~70% (range of 50-75%) of the decline postthe initial panic reaction (once the INR stabilized). •Actual impact on Bharti’s valuation is moderate as Africa business acts as a natural hedge. We estimate Bharti’s Africa currency basket to have depreciated by only ~2% QTD v/sUSD as compared to ~5% for INR. •Assuming a 5% depreciation in the Africa currency basket and 10% depreciation in INR v/sUSD, net valuation impact is only INR9.4/sh. Valuation and view The stock trades at EV/EBITDA of 7.3x FY14 and 5.9x FY15. Maintain Buy with a target price of INR450/sh.
Posted on: Wed, 23 Oct 2013 03:51:42 +0000
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