Analysts' corner

Great Offshore
Reco Price: RS 419
Target Price: RS 606

Great Offshore (GOFF) reported standalone revenues of Rs 278.5 crore for the quarter, an year-on-year (y-o-y) growth of 3.3 per cent, ahead of expectations. This is largely on account of a three-month extension in the contract of its rig ‘Kedarnath’. GOFF’s margins strengthened 150 basis points (bps) to 50.4 per cent on account of a write-back in provisions under the ‘employee cost’ head, as well as lower ‘other expenditure’ compared to the fourth quarter of FY09. However, on a consolidated basis, the company reported lower revenues and net profit on account of GOFF’s newly-acquired company, Kei-RSOS, reporting a loss due to a number of vessels undergoing dry-docking. According to the management, the insured value of the assets on its books stands at Rs 3,900 crore, while the advance towards the rig and the multipurpose support vehicle that Bharati Shipyard is currently building stands at Rs 800 crore. Maintain accumulate.

— Prabhudas Lilladher

Zee Entertainment Enterprises
Reco Price: RS 302.05
Reco Price: NA Zee Entertainment Limited (ZEEL) has reported revenue growth of 26 per cent year-on-year (y-o-y) and 22 per cent quarter-on-quarter (q-o-q) for the fourth quarter of FY10, buoyed by the merger of its regional general entertainment bouquet of channels (R-GEC). Advertising revenues rose 54 per cent y-o-y. However, excluding the R-GEC business, growth was at 11 per cent. Subscription revenues recorded muted growth at 7 per cent y-o-y, mainly due to a decline in the international and domestic cable segments. At current valuations of 23x and 19x FY11E and FY12E earnings, positives are priced in and the stock holds little upside potential. The brokerage did not rate the stock. 

— Religare Capital

HCL Technologies
Reco Price: RS 374
Reco Price: RS 419 HCL Technologies’ third-quarter FY10 earnings were significantly above the Street’s estimates due to lower-than-anticipated depreciation and amortisation charges, lower forex losses and decline in the effective income tax rate. The volume growth of 9.2 per cent q-o-q in information technology services, coupled with strong hiring in the third quarter of FY10, is a pointer that the company will continue the volume growth going forward. Consolidated revenues rose 1.4 per cent q-o-q to Rs 3,075.7 crore, while the operating profit margin contracted by 131 bps q-o-q to 19.7 per cent in the quarter due to the appreciation of the rupee. Net income rose 15.9 per cent sequentially to Rs 343.9 crore. The stock is trading at 15.3x FY11 earnings estimate and 13.7x FY12 earnings estimate. Maintain buy.

— Sharekhan

Infotech Enterprises
Reco Price: RS 394
Reco Price: NA Infotech Enterprises’ (Infotech) fourth-quarter revenues were in line with the muted expectations; though net profits were significantly ahead of estimates, driven by forex gains and reduction in operating cost. Lower depreciation and tax rate also added to the performance. Revenues, at Rs 240 crore, were largely driven by 6.2 per cent q-o-q volume growth. Earnings before interest, tax, depreciation and amortisation (Ebitda) margins stood at 21.6 per cent (flat q-o-q) despite adverse currency movement. Infotech also announced a bonus issue of 1:1, suggesting an increased confidence to service higher equity. Tighter cost control has helped the company expand its Ebitda margin to 21.9 per cent. The stock is trading at a P/E (price to earnings) of 12x FY11E and 10.5 FY12E earnings (ex-cash). Maintain buy.

— Edelweiss Research