Analysts` corner

Reliance Industries, ABB, Crisil & Mindtree

RELIANCE INDUSTRIES
Reco price: Rs 748 ;
Target price: Rs 860
After its recent 15 per cent correction, 2012 is now Reliance’s fifth straight year of relative under-performance. Analysts foresee some triggers emerging by year-end but singular variables, such as a gas price increase or the telecom foray, may not be enough for a sustained re-rating. Reliance needs to create a deep portfolio of projects to rekindle investor interest. Further, these may need to be in the energy chain; its $8.5 billion non-core portfolio has been a drag on performance. Reliance has been more reticent here than analysts had expected clouding its long term outlook. Outperform.

- CLSA

ABB
Reco price: Rs 823;
Target price: Rs 503
ABB will invest Rs 250 crore to build new facilities in India to manufacture high-voltage power products and transformers. The expansion is part of ABB’s strategy to develop, manufacture and market products that meet the needs of Indian customers, as well as serve as an export hub. The facilities will be located in Savli, near Vadodara, Gujarat, and would produce high-voltage gas-insulated switchgear (GIS) and PASS (plug and switch system) hybrid switchgear, as well as dry-type and oil immersed distribution transformers. Maintain sell.

- Angel BrokinG

CRISIL
Reco price: Rs 1,069;
Target price: Rs 1,240
Crisil’s Q1’CY12 results were in line with expectations with adjusted revenue of Rs 227 crore and adjusted net profit of Rs 54 crore. Rating revenues (adjusted for one-time income of Rs 7 crore), grew a robust 30 per cent yoy to Rs 94 crore, aided by strong growth in BLR/ debt issuances/ratings on securitisation transaction. Research revenues remain flat qoq at Rs 115 crore. However adjusted for forex translation loss, full time equivalent would have grown by a strong seven to eight per cent. Accumulate.

- Emkay Global Financial services

MINDTREE
Reco price: Rs 488;
Target price: Rs 1,420
MindTree’s FY12 positives were refocusing on key sub-verticals and strategic accounts (active clients have declined from 283 to 237 since Q1), and controlling attrition (18 per cent versus 26 per cent in Q1). Management sees more margin levers from utilisations (470 basis points below Q1 levels) and lower-cost graduate hiring. But unlike Infosys, MindTree may have to increase wages in FY13, while higher visa and front-end costs could hurt. About 200 basis points (bps) of the 350bps FY12 margin expansion (off a depressed base) came from forex. If the forex reverses, analysts see MindTree’s high operating leverage (low margin, 87 per cent offshore base) leading to significant EPS cuts. Maintain reduce.

- BNP Paribas Equities