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Analysts' corner

Infosys, Jindal Steel & Power & Jyothy laboratories

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INFOSYS
Reco price/date: Rs 2,522/June 18
Current/target price: Rs 2,505/Rs 2,600
sees demand status quo from Q4’FY12, though headline risks remain— a message similar to that from peer TCS. Analysts understand worries that the macro environment could significantly worsen in second half of FY13 are behind continued slow client decision making. But, most of these issues seem to be factored in the Q1 constant currency (CC) guidance. With the demand situation well-flagged, currency may drive modest stock gains near term. The recent USD/INR depreciation (up eight per cent versus FY13 guidance, if it sustains) could be partly offset by cross-currency movements (down one per cent versus guidance), while some may need to be budgeted for wage rises and for other investments. Maintain hold.

BNP Paribas Securities

JINDAL STEEL & POWER
Reco price/date: Rs 437/June 18
Current/target price: Rs 429/Rs 648
Jindal Steel & Power (JSPL) expects the Odisha government to revise favorably the free power supply clause from captive coal-fuelled CPP’s from 33 per cent to 13 per cent. This should create ground for start of UtkalB1 coal mine operations by end FY13. Analysts estimate the mine’s DCF valuation at Rs 51/share. Phase-II of the Angul steel plant (5.5mtpa capacity) is ready for launch and part of the iron ore requirement is secured. While benefits of this expansion will be back-ended, JSPL’s consolidated debt to equity of 1.0 will comfortably absorb the increased debt in the interim. Maintain buy.

Edelweiss Securities

JYOTHY LABORATORIES
Reco price/date: Rs 234/June 18
Current/target price: Rs 229/ Rs 268
Jyothy Laboratories’ (JLL) board approved the proposal for merger of Henkel India Ltd (HIL) with itself. The share swap ratio is decided to be 1:8, i.e. shareholders of HIL will get 1 share of JLL for every 8 shares of HIL, subject to adjustment for an impending issue of bonus shares in the ratio of 1:1 by JLL, which if approved in AGM the swap ratio will be 1:4. The shares held by JLL in HIL will be extinguished post merger and the equity of JLL will increase by 2.87 per cent. The management expects the combined entity to post a growth of 50 per cent. With HIL’s turnaround plan in place, analysts expect the synergies to start showing results in coming years. Accumulate.

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