Analysts' corner

WIPRO
Reco price: Rs 691
Target price: Rs 850 Wipro’s fourth-quarter profit beat estimates. The management said clients exuded more confidence and were back to decision-making. It said budgets for 2010 would be flattish or rise marginally. Wipro has projected first-quarter revenue of $1,190-1,215 million, a 2.1-4.2 per cent quarter-on-quarter (q-o-q) rise, better than peers. Revenue grew 0.1 per cent q-o-q (in rupee terms) and 3.8 per cent (in dollars). IT services revenue was up 3.5 per cent q-o-q in dollars (4.7 per cent in constant currency terms).

Financial services (3 per cent growth) and infrastructure services (3.3 per cent growth) were primary growth drivers. The brokerage has lowered FY11 and FY12 earning per share (EPS) by 3.8 per cent and 3.4 per cent, respectively, to Rs35.4 and Rs 40.2, on account of the rupee appreciation. It has raised its target multiple to 24x FY11E earnings, from the earlier 23x, given greater revenue assurance and the company’s positive comments on future growth. Maintain buy.

— Anand Rathi Research

RELIANCE INDUSTRIES
Reco price: RS 1,087 
Target price: RS 1,220 Driven by a lower-than-expected gross refining margin (GRM) of $7.5/bbl, RIL’s fourth-quarter profit after tax (PAT) was Rs 4,700 crore. While revenues remained flat on a sequential basis, earnings before interest, tax, depreciation and amortisation (Ebitda) clocked 16 per cent growth. Margins expanded 207 basis points q-o-q as a result of higher refining cracks. Operational performance continues to be robust. Petchem registered EBIT margin expansion of 50 basis points q-o-q, driven by higher cracker margins. Strong domestic petchem demand ensured healthy volume growth (+14 per cent y-o-y). Oil & Gas EBIT registered healthy growth of 15 per cent q-o-q on the back of KG-D6 gas volumes of 60mmscmd. The brokerage expects RIL’s GRMs to improve from $6.7/bbl in FY10E to $7.6/bbl and $10/bbl in FY11 and FY12, respectively. Maintain buy.

— Ambit Capital Research

NESTLE
Reco price: RS 2731 
Target price: RS NA Revenues increased 16.9 per cent y-o-y to Rs 1,480 crore, led by volume growth, as little pricing action was taken in the first quarter of 2010. Domestic sales increased 16.7 per cent while 20.4 per cent rise in exports was partially offset by adverse currency movement.EBITDA was flat as pricing was insufficient to offset the increase in milk, wheat and sugar prices.

Hence, the EBITDA margin declined 392 basis points y-o-y. Net profit was flat at Rs 200 crore following a higher tax rate.Although positive on sales growth, the brokerage highlights the cost pressure it could face over the medium term. Expect margin pressure to continue over the next couple of quarters due to input costs and higher ad spends. 2010 and 2011 EPS estimates have been cut 5 per cent. At Rs 2,731, the stock is trading at price to earnings of 32.7x and 27.8x. Maintain hold.

— Edelweiss Research

ICICI BANK
Reco price: RS 976 
Target price: RS 1,151 ICICI Bank’s fourth-quarter PAT grew 35.2 per cent y-o-y. It, however, declined by 8.7 per cent q-o-q. Net interest income came down by 4.9 per cent y-o-y and 1.1 per cent q-o-q. Margins were stable at 2.6 per cent sequentially, but likely to contract in the coming quarters by 15-20 basis points. Balance-sheet contraction continued as advances and deposits declined. However, advances grew marginally by 1.1 per cent q-o-q after declining for three consecutive quarters. Notably, current account, saving accounts (CASA) deposits grew, taking the CASA ratio to 41.7 per cent. Maintain buy.

— Prabhudas Lilladher