Per press reports, the board of state-owned BSNL has decided to scrap a 93m global system for mobile (GSM) line order on the recommendation of the Sam Pitroda committee, although a final government decision is still pending. The BSNL order would have led to earnings upgrades given the order size of INR20-25bn, which is 40% of the current order book (INR60bn, 1.6x of FY10e sales).
There is no earnings impact as we had not factored in this order but sentiment will be negative towards the stock. We maintain our N(V) rating with a target price of INR595 at an implied PE multiple of 13x on forward September FY11e EPS. The stock is trading at an FY12e PE of 12x, which is somewhat of a premium given its lower 2-year earnings CAGR of 13% as compared to peers like Kalpataru Power.
