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Analyst's corner

IDFC, ZF Steering Gear, Kavveri Telecom Products & IndusInd Bank

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Reco Price: Rs 179,
Target Price: Rs 209
IDFC posted in line with the brokerage’s expectations a standalone net profit of Rs 320 crore as compared to Rs 243 crore posted last year. The consolidated net profit grew by 22 per cent to Rs 335 crore on the back of strong infrastructure loan growth of 39 per cent, which was further aided by 23.1 per cent growth in non-interest income primarily from principal investment activities. The loan book expanded by Rs 3,900 crore sequentially and was up 39 per cent year-on-year. IDFC's “IFC” status will enable it to mobilise funds at lower cost and get flexibility in infrastructure lending. IDFC SecuritiesKey triggers include robust loan growth, stable spread and margins, superior asset quality and strong earnings growth. Maintain buy.

— KR Choksey

Reco Price: Rs 401.7,
Target Price: Rs 444
ZF Steering Gear (ZF) is perfectly positioned to capture the 20 per cent expected increase in commercial vehicle (CV) sales for 2010-11 with its broad customer base, strong reputation and product profile. It has enough capacity for the next 2-3 years. ZF is expected to operate at higher levels leading to better capacity utilisation and improvement in return on capital employed. This could also lead to economies of scale and improvement in margins. Higher wind power capacity also reduces the company’s dependence on the grid. The company also has strong financials, which is reflected by its zero net debt position. ZF could also get re-rated and quote at about 11-12 times its 2010-11 estimated earnings. ZF could be bought at Rs 401.7 and added on declines.
Maintain buy.

— HDFC Securities

Reco Price: Rs 133,
Target Price: Rs 215
Kavveri Telecom is the only company in India with global original equipment manufacturer supply agreement and exporting RF products and antennas to North America. It has space and defence qualified products with strong R&D capability. It has 26 patents in its kitty. Kavveri Telecom Infrastructure, one of its five subsidiaries, has signed a long term agreement for ten years with six telecom operators, which will give traction to revenues in coming years. Demand outlook for niche telecom products is growing very fast and margins are also better. Looking at strong fundamentals and growth potential in domestic and global markets, the brokerage expects over 50 per cent growth in earnings in 2010-11.
Maintain buy.

— Anand Rathi

Reco Price: Rs 221,
Target Price: NA
IndusInd is working to accelerate loan growth (about 35 per cent CAGR over FY10-13) and grow profitably. Higher margins, strong fee income, operating leverage and lower credit costs would drive a sustainable expansion in the bank’s return on assets to about 1.6 per cent. Building in an equity dilution and higher credit growth, we upgrade our 2010-11 and 2011-12 earnings estimates by 4 per cent and 8.6 per cent, respectively. The stock has outperformed the Sensex by about 100 per cent over the last year. Traction in earnings (about 3 times in three years) as also assets (about 2.5 times) should drive the stock hereon. IndusInd is our top mid-cap pick among financials.
Maintain outperformer.

— IDFC Securities

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