Category: Economy, Markets and Macro Views

Infosys Technologies missed the street expectations and marked the end of an era of QoQ. QoQ Net Profits Fell to Rs 1079 crore in the first quarter of FY08 against Rs 1,144 crore in the previous quarter.

Infosys Q2 and FY08 guidance
The company is expected to post growth of 16.9-18.3% in the revenues in FY08 at Rs 16,238-16,433 crore. Infosys is expected to deliver growth of 13-14.1% in FY08 EPS at Rs 78.20-79.

FY08 EPS (Excluding tax write back) is seen at Rs 77.31-78.11.

This FY08 revenue outlook is based on rupee rate of 40.58 per USD.
The Q2 revenues are seen at Rs 3,952-3,993 crore, a growth of 4.74-5.83% and EPS seen at Rs 18.88. Net profit is expected to go down 0.05% at Rs 1078 crore. Infosys revised guidance in the dollar terms in upward and in Rupee terms down.

This is according to Citigroup’s Technical Research [Click on the chart to expand]

Taking price extreme at 12,316 (16 March 2007), the index completed Wave (1) at 14576 (30 May 07). Wave (2) corrected the advance in Wave (1) towards 13,946 (low of 12 June 07). Currently we are into Wave (3) of the advance, which has a minimum price target of 16,206 (taking Wave (1) = Wave (3) in “Price Movement”. Wave (3) target of 16206 is derived as 2,260+ 13,946.The levels of 2,260 is derived as the distance between start of Wave (1) at 12,316 and end of Wave (1) at 14,576: [i.e. 14,576-12,316=2,260].The level of 13,946 is the assumed end of corrective Wave (2).

Technically, the sensex is headed towards 16,206.

The Indian market bounced back during 1H07 after jitters caused by inflation,
rate hikes, tightening liquidity and currency appreciation, but it still lagged
regional peers. Citi believes the worst is over on the above concerns and growth remains robust (though less spectacular than recent years), Citi is positive on Indian equities over the next 6-12 months. Citi sets a Sensex target of 16,000 for Dec-07 (at the upper end of our earlier 14,700-16,000 target) and 17,500-18,400 for Dec-08, the market would be trading at a 12-month forward P/E of 17.3x and 16.3-17.1x for Dec-07 and Dec-08, respectively.

The average growth of EPS for SENSEX stocks is expected to be 15.08% for FY08 and 12.4% for FY09. Here is Historical Chart of BSE Sensex Stocks based on their forward Earnings Projections. If you want to read the full report send an e-mail to feedback @ dalalstreet.biz

NOTE:
In our view Sensex is a notional value. Keep BUYING wherever you find value. Small investors should take the Mutual Fund SIP route.

ICICI Research has an Outperform recommendation on JK Cements Ltd and Tata Chemicals Ltd.

JK Cement Ltd:
JK Cement is a play on the booming cement market in the northern region. The company’s aggressive expansion-cum-cost-cutting plan coupled with low valuations make the stock a good medium to long-term investment.

On EV/tonne basis, JK Cement is quoting at $65 per tonne, which is lowest compared to the deals that have happened recently ($150-$200 per tonne). The scrip currently quotes at 3.29x EV/EBITDA of FY09E. ICICI has valued JK Cement at 4.83x EV/EBITDA of FY09E, which yields a value of Rs 255 per share. At the target price, the stock would be valued at an EV/tonne of $107, which is still at a considerable discount to the market. Buy with a 12 Month target price of Rs 255, 71% upside potential from current levels. JK Cement is expected to report an EPS of Rs 27 for FY08 and Rs 33 for FY09.

Tata Chemicals Ltd:
Tata Chemicals Q3FY07 results were in line with expectations. Standalone net sales grew 4% y-o-y to Rs 1307 crore while standalone net profit was 19% higher (y-o-y) at Rs 117 crore on the back of better realizations and higher volume.

Tata Chemicals consolidated revenue to grow at a CAGR of 25% to Rs 6,044.01 crore over FY05-FY08E. Consolidated net profit should grow at a CAGR of over 20% to Rs 593.10 crore during the same period.

Tata Chemicals is trading 8.32x FY08E consolidated EPS of Rs 27.57 and 9.58x FY07E consolidated EPS of Rs 24. ICICI is not changing estimates and sticks to sum-of-parts valuation, wherein the fair value is Rs 374. Target price gives us an upside of 65% from the current levels. ICICI reiterates an OUTPERFORMER rating.

Stone India announced during market hours today, that the company had received an initial development order from the Indian Railways for supply of five sets of 180 kilo volt-ampere (KVA) static converter for locomotive application. This is a high-value, solid-state product to be supplied under collaboration with SMA Technologies AG, Germany.

On 23 April 2007, Stone India entered into an exclusive understanding with ZRJC, China, to supply air-conditioning systems for trains. This product will be manufactured at its upcoming plant in Nalagarh, Himachal Pradesh, which enjoys tax benefits.

On 14 April 2007, Stone India had received an order for refurbishment and upgradation of 1,115 wagons from the Union Ministry of Defence. The order, valued at about Rs 14 crore, to be executed over the next eight months.

The scrip had hit a high of Rs 199.85 and a low of Rs 180 so far during the day. Its 52-week high was Rs 278.80 on 29 August 2006 and 52-week low Rs 104.30 on 30 April 2007.

The Stone India stock had risen 18.31% over the last one month to 6 July 2007 compared to the Sensex’s return of 5.48%. The scrip had outperformed the market over the past quarter, gaining 22.88% compared to the Sensex’s rise of 16.40%.

The Bombay Stock Exchange Sensex hit a new all time high today – 15,000. Top gainers amongst Sensex stocks are – Satyam Computers, TCS Infosys Technologies, Bharti TeleVentures and Gujarata Ambuja Cements Ltd.

ICICI Bank and Tata Power are the major losers in SENSEX stocks.