Analysts' corner

BHEL, United Spirits, Reliance Communication & Tata Consultancy Services

BHEL
Reco price/date: Rs 182/April 9;
Current/target price: Rs 178/Rs 222
BHEL announced a good set of order inflow numbers for FY13, which has surprised the Street. BHEL is well positioned to benefit from (1) Revival in the power sector award activity, given their market positioning, (2) recent strategic initiatives to diversify in to new areas (inc. of solar power, railway wagons) & geographies, (3) huge bid pipeline (highlighted by management). At a reco price of Rs 182, BHEL is trading at 6.6 times FY14 estimated earnings per share. With signs of revival in the award activity already seen, IndiaNivesh Research has upgraded the stock by one notch from HOLD to BUY.

-IndiaNivesh Research

UNITED SPIRITS
Reco price/date: Rs 1,797/April 10;
Current/target price: Rs 1,818/Rs 2,200
United Spirits has received all regulatory approvals with respect to the stake sale to Diageo. As previously announced, there are three phases of the deal. Importantly, there is no change to either the phased manner of the deal or the open offer for minority shareholders versus what was previously announced. The stock has held up well, despite newsflow which has been sometimes concerning. Long-term structural story of premiumisation in an attractive underpenetrated category remains intact. Valuations at 25 times FY15 estimated earnings versus the sector average of 24 times is reasonable, given the strong earnings growth expected over the next couple of years. Maintain Buy.

-Nomura Equity Research

RELIANCE COMMUNICATION
Reco price/date: Rs 63/April 8;
Current/target price: Rs 73.20/Rs 86
Reliance Industries (RIL) has agreed to pay Reliance communication (RCOM) Rs 1,200 crore , or 20 per cent of our estimated replacement cost, for the intercity network (1,20,000 km of domestic intercity fiber). After its Rs 1,200 crore infrastructure utilisation deal with RIL's Jio Infocomm. Four more possible deals could cut RCOM's debt by Rs 7,700 crore more - nearly halving net debt to Ebitda and allaying our key concern. We see attractive valuation with limited downside. Upgrade to Over Weight.

-Morgan Stanley Research

TATA CONSULTANCY SERVICES
Reco price/date: Rs 1,481/April 10;
Current/target price: Rs 1,530.05/Rs 1,590
TCS has acquired French IT services firm 'ALTI' for 75 million euros (Rs 530 crore) in an all-cash transaction (0.59x CY2011 revenue, 8.2x EV/Ebitda). This acquisition, which is all set to strengthen the company's presence in France and Continental Europe, is expected to be completed by June 2013 and ALTI will start contributing to sales from July 2013 (subject to regulatory approvals). The acquisition will help TCS to get access to several blue-chip clients across Europe with an expanded set of services & solutions and an opportunity to cross-sell. We maintain 'Accumulate' (18x FY14E earnings estimate).

-Prabhudas Lilladher Research