Analysts' corner

PTC India & TCS

PTC INDIA
Reco price/date: Rs 58/September 18
CMP/target price: Rs 61.05/Rs 74
The research firm has turned positive on the stock due to easing receivables situation from Tamil Nadu (TN), tolling arrangement project stabilised and generating at full capacity using lower cost coal and no impact of CAG report on coal block allocation. TN is repaying its dues to PTC on regular basis, with the next tranche of Rs 0.5 bn expected next week. PTC has started supplying to TN in small quantum and monitoring payment pattern, if satisfactory supply would be increased gradually. This would not only improve the volume but also the trading margin as TN has been paying a healthy margin of Rs seven paisa/unit. UP repayment would remain overhang in the near term. However, we maintain our positive view on PTC in the medium to long term. At CMP, on standalone basis, the stock is trading at 0.75x/0.70x FY13E/FY14E BV. Reiterate BUY.

IDBI Capital Research

TCS
Reco price/date: Rs 1,342/September 17
CMP/target price: Rs 1,300.4/Rs 1,250
In the company’s analyst meet, the management indicated that growth in volumes in September 2012 quarter is likely to be strong though lower than previous quarter. But it will be sufficient to deliver front-ended, better-than-industry revenue growth for FY13. Earnings before interest and tax margin is likely to be flattish quarter-on-quarter and likely to disappoint due to geographic mix-related pricing impact and re-investments. The company’s stock is trading at an expensive valuation of 17 times FY14 estimated earnings and trading on high expectations. Though we like the company’s execution, it is not insulated from sector level concerns on increasing competitive intensity, pricing and cost driven margin pressure and demand slowdown. Maintain REDUCE.

Kotak Institutional Equities