Zensar's operating results for 4Q were, once again, lower than estimates. Revenues fell short of expectations due to de-growth in products / licenses revenues. Even excluding the products / licenses business, revenues were flat in USD terms. The IMS business has stagnated over the past several quarters with USD revenues in 4QFY16 lower than that in 1QFY14. The products business is also expected to remain ranged, we understand. The organic CC services revenue growth in FY16 has been about 5%. In FY15 also, the organic growth in services was just about 1% YoY in USD terms, we believe. In FY14, USD revenues, excluding bought-outs, were likely lower YoY. 4QFY16 margins fell by about 204bps, largely due to one-off provisions and sales expenses. The management has been positive on the future prospects, though, on the back of the order bookings and the pipeline. Our FY17 and FY18 EPS stand at Rs.75.4 and Rs.85.1, respectively. In our DCF model, we have incorporated a more benign operating environment in our near term assumptions, which has resulted in a PT of Rs.958 (Rs.872). We maintain REDUCE (Sell on inclines). We will become positive on the stock only when, there is more stability / growth in revenues and profitability initiatives start playing out sustainably.
Result Update: M&M Financial Services
Strong seasonal recovery aided in better than expected earnings - NII grew 13.3% YoY; Sharp decline in NPA provisions (down 68.0% QoQ) helped PAT to grow 11.1% YoY. NIM saw 273bps improvement QoQ (calculated) due to strong interest recovery as well as 20bps QoQ decline in cost of borrowings. Management focus remained on collections rather than business growth visible from moderate traction in disbursements. Although M&M Finance saw sharp improvement in its asset quality (partly seasonal in nature) during Q4FY16, we expect asset quality pain to persist in near term. Management has also indicated that shift from 135 dpd to 120 dpd during Q4FY16 had very limited impact on income de-recognition. Nonetheless, M&M Finance is better placed to deliver superior growth vis-à-vis its peers if rural market sentiment improves, we foresee asset quality overhang in near term reflecting stress in the rural economy. We are also modelling modest return profile (RoA: 2.0%; RoE: 12%) during 17E. We recommend SELL on the stock with revised TP of Rs.285 (Rs.200 earlier; 3.0x FY17E ABV).
Result Update: Cairn India Ltd. (CIL)
¾ Q4FY16, CIL has reported a net loss of Rs.109.5 bn mainly on account of goodwill/non-producing oil and gas assets impairment (Rs.116.7 bn) and lower revenue on account of lower realization/volume. Impairment of goodwill is a mere book entry and doesn't impact cash flows. However, normalized PAT stands higher at Rs.6.28 bn, aided by lower DD&A charges and higher other income. The Company has declared a final dividend of Rs.3/share (dividend yield 2%)
¾ Lower crude oil prices, flattish volume growth and merger are some of the key headwinds for the stock in the near term but extension of PSCs and any improvement in crude oil realization either due to lower discount/export/increase in crude oil prices can improve the fundamentals of the company and investment climate for CIL. At the current price of Rs. 144, the stock is fairly valued at 2.3x EV/EBIDTA and 16.4x P/E based on FY18E earnings estimates. Post recent run-up in the stock, we now recommend SELL (earlier Accumulate) on stock with a DCF based target price to Rs.131/Share (earlier Rs.126/share).
You received this message because you are subscribed to the Google Groups "LONGTERMINVESTORSRESEARCH" group.
To unsubscribe from this group and stop receiving emails from it, send an email to longterminvestorsresearch+unsubscribe@googlegroups.com.
Visit this group at https://groups.google.com/group/longterminvestorsresearch.
For more options, visit https://groups.google.com/d/optout.
No comments:
Post a Comment