Analysts' corner

Axis Bank, Indraprastha Gas & Tulip Telecom

AXIS BANK
Reco price: Rs 1,301
Target price: Rs 1,750
The management of Axis bank reiterated its focus on the corporate banking segment centering on the infrastructure space, complemented by the bank’s capabilities in retail liabilities. Key overhang on Axis Bank stock has been its rising exposure to the power sector (9.8 per cent, including non-fund based), amidst concerns surrounding the sector. Also, the balance sheet exposure to power sector is 3.85 per cent, lower than the sector average of 8 per cent. Granular details on key area of power sector exposure (overstating of the non-funded exposure) allayed the concerns to a greater extent. The management reinforced the above average industry growth, maintaining the NIM within the 3.25-3.5 per cent band. The stock is attractive at 2.4 times of FY12, with estimated adjusted book and 13 times of FY12 estimated earnings.

—Edelweiss

INDRAPRASTHA GAS
Reco price: Rs 412
Target price: NA
Indraprastha Gas reported a robust Q1FY12. Net sales grew by 59.9 per cent YoY to Rs 536 crore. However, the raw-material costs increased by 80 per cent YoY to Rs 301 crore. Hence, Ebitda grew by only 47.1 per cent YoY to Rs 158 crore in the first quarter. Ebitda margin slipped 258 bp YoY by 29.5 per cent in the first quarter of FY12. Further, interest expense stood at Rs 9 crore in Q1FY12 compared to nil in Q1FY11. Hence, net profit decreased by 39.6 per cent YoY to Rs 80 crore.

—Angel Broking

TULIP TELECOM
Reco price: Rs 154
Target price: Rs 225
Tulip’s Q1 Ebitda and net profit were up 30 per cent and 20 per cent YoY respectively and were in line with the expectations. Tulip’s revenues at 24.5 per cent YoY were above the estimates. The management reported several positive business developments, including data-centre (DC) orders with annual potential revenue of Rs 100 crore. The Board has approved the issue of long-term capital, incl. warrants to promoters. Analysts believe the reason behind it is to build a cushion for potential FCCB redemption or a possible delay in fund raising in DC arm. Tulip is adequately funded (cash balance + cash profits) for FY12 capex with Rs 700 crore.

—Anand Rathi Research