Analysts' corner

Maruti Suzuki
Reco Price: Rs 1,358
Target Price: Rs 1,405

An unexpected increase in the royalty payment by Maruti Suzuki (MSIL) led to a 20 per cent decline in Q1 FY11 net profits to Rs 470 crore.

The company has raised royalty and technology fees to its parent Suzuki from 3.4 per cent to 5.1 per cent. Post this, FY11 and FY12 earnings estimate are revised downwards by 20 per cent each.

While maintaining volume estimates for FY11 and FY12, the brokerage reduced margin estimates by 200 bps each to reflect the change in policy on royalty payments. The stock is currently trading at 15.5x its FY12 earnings estimate. Maintain hold.

— Pinc Research

Punj Lloyd
Reco Price: Rs 135
Target Price: Rs 185

For the past three-four days Ensus Bio-ethonal refinery recorded steady 98 per cent capacity utilization. Over next few days this is expected to reach 100 per cent, when the completion certificate would be given to Simon Carves.

Some residual write-off could be possible. PLL received $40-45 million for another two packages while the advance of about $15 million for the last package is expected early next week. The slow moving order book will enter execution mode thereby improving revenue visibility and execution re-rating.

Last two years have been tumultuous for PLL with several write offs hitting profitability. Expect an improvement in PLL’s fundamentals and positive momentum in Libya, order booking continues to remain robust with first quarter FY11 order intake at Rs 4,000 crore. The stock trades at estimated 12x FY12 EPS. Maintain buy.

— Ambit Capital