Contents in today's MORNING INSIGHT
¾ Economic News
¾ Corporate News
Analyst Meet Update: Infosys Technologies Ltd
We attended the analyst meet held by Infosys last week. The management did acknowledge short term headwinds, primarily arising out of Brexit. Apart from RBS deal, the management indicated softness in a few other accounts, which may impact revenue growth in FY17. While there are tailwinds in the domestic business, we do expect Infosys to moderate guidance for the current fiscal, though marginally. The deal pipeline is healthy and the win rates continue to be sustained. Infosys continues to progress well on its New and Renew strategy as reflected in the presentations made on Automation, Design Thinking and Artificial Intelligence. Infosys also addressed concerns about attrition and senior level exits. We expect these investments to help Infosys sustain better growth rates in the future by catering to the changing needs of the clients. We moderate our earnings estimates to Rs.65.2 (Rs.65.9) and Rs.71.3 (Rs.72.4), respectively. Our price target stands marginally reduced to Rs.1212 (Rs.1232). We maintain faith and also our BUY recommendation. While we believe that, the stock price has largely factored in the potential FY17 guidance cut, we await the extent of cut.
Result Update: PNC Infratech Ltd
PNC Infratech Q1FY17 results were a mixed bag. The standalone net sales (EPC Business) for the quarter grew by 18.6% yoy to Rs 5.15 bn and was slightly below our estimates of Rs 5.32 bn due to delay in execution pickup in new projects. The new orders bagged by the company in the past one year would come for execution in Q3FY17 due to delay in land acquisition and strong monsoon. The EBITDA margin fell marginally by 80 bps on yoy to 13% but was inline with our estimates of 13%. EBITDA for the quarter was Rs 671 mn, grew at 11.5% yoy Vs our estimates of Rs692 mn. PBT for the quarter grew by 76.2% yoy to Rs 703 mn (Vs estimates of Rs 500 mn) and was ahead of estimates due to one time interest income of Rs 140 mn on Rs 850 mn loans and advances to Ghaziabad Aligarh BOT project. Besides this, interest cost also declined in the quarter on lower working capital. PAT for the quarter grew at 145% yoy to Rs 640 mn (Vs our estimates of Rs 350 mn) led by strong PBT and MAT credit. Further, the tax provisioning for the quarter was low due to the company claiming 80IA benefit on favorable assessment for prior years. The current order book stood at over Rs 64.7 bn including L1 order of Rs 1.2 bn. The company is positive on future order inflows and has maintained 20% revenue growth guidance for FY17 with EBITDA margins of 13-14%. We maintain positive view on the company and our target price of Rs 134 (adjusted for stock split). We assign ACCUMULATE rating (Vs Buy earlier) on the stock considering recent run up in the stock price.
Result Update: Tata Motors (TAMO)
TAMO's 1QFY17 results were impacted by unfavorable forex impact at JLR. Consolidated revenues grew by 9% YoY to Rs659bn. However unfavorable impact of forex led to consolidated EBITDA declining by 31% YoY. Consolidated net profits declined by 57% YoY to Rs22bn. For JLR, volume growth is likely to stay healthy. JLR's EBITDA margin in 1QFY17 was impacted by unfavorable forex impact. Post Brexit, GBP weakness is positive for JLR from medium to long term perspective. However, in the near term, benefits from weaker GBP will be offset by hedges taken when GBP was stronger. We expect steady improvement in standalone business in FY17 and FY18. We lower our FY17 estimates but increase our FY18 estimates. We recommend ACCUMULATE (earlier BUY) on the stock with revised price target of Rs538 (earlier Rs488).
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