Analysts' corner

MindTree, Dena Bank, Allahabad Bank & Eicher Motors

MINDTREE
Reco price/date: Rs 605/June 25
Current/target price: Rs 617/Rs 700
The brokerage expects the company to deliver growth of 14 per cent (in dollar terms), led by stronger growth in information technology services and high single-digit growth in the product engineering services segment. The company is seeing good traction in the US, with stable environment in Europe. Also, the strategy to focus on existing clients and increase their wallet share is paying good dividends, as revenue per client has risen. A focused approach to mine few clients and win large deals would help MindTree to deliver growth ahead of the industry. Overall, it is expected to witness a steady top line growth but focus on margins to accelerate earnings per share growth. Hence, room for positive surprise in FY13. Maintain Buy.

 

Prabhudas Lilladher

DENA BANK
Reco price/date: Rs 97/June 25
Current/target price: Rs 95.7/Rs 120
Dena Bank has a well-diversified loan book spread across multiple segments. This witnessed robust growth over FY09-12, (25 per cent annually), with corporate and MSME (micro, small and medium enterprises) lending being prime focus areas. Despite strong growth, the bank has not compromised over asset quality, as reflected in the gross non-performing asset (NPA) ratio. The asset quality has improved remarkably, with the delinquency ratio declining from 2.6 per cent in FY09 to 1.4 per cent in FY12. The management has targeted a credit growth of 22 per cent for FY13. According to the trend in past two years, Dena Bank has posted strong growth in H2 compared to H1. The brokerage builds in a 22.5 per cent annual growth in the loan book over FY12-14E, backed by an impending improvement in macroeconomic conditions and better liquidity. Maintain Buy.

IIFL

ALLAHABAD BANK
Reco price/date: Rs 147/June 25
Current/target price: Rs 147.5/Rs 205
Allahabad Bank is well-placed among its peers on parametres like strong net interest margins (NIMs), healthy asset quality, superior return ratios and comparatively lower restructured book. Although NIMs are expected to moderate and near-term concerns over increasing slippages from the retail and agri does persist, we believe the positives definitely outweigh the concerns and the stock can be bought at current levels. At CMP of Rs 147, Allahabad Bank is trading at 0.72x of its FY13E ABV and 0.61x of its FY14E ABV whereas on PE it is trading at 3.64x and 2.96x for FY13E and FY14E, respectively. The bank enjoys healthy return ratios with return on equity of 17.9 per cent and 18.9 per cent expected in FY13E and FY14E, respectively. Recommend Buy.

Nirmal Bang

EICHER MOTORS
Reco price/date: Rs 1,991/June 22
Current/target price: Rs 1,993/Rs 2,807
In its motorcycle business, Royal Enfield demand has not been affected by the ongoing economic downturn. Waiting period ranges from two-nine months on different models. Also, new Thunderbird 500cc is likely to be launched in Q3 CY12 and could act as a positive trigger. Additional capacity is likely to come on stream in Q1 CY13 (we have built in Q2 CY13). In the truck business, the company has been gaining market share in the heavy-duty truck business even though demand is shrinking. The concern is increasing discounts. Intermediate commercial vehicles and bus demand still exists. Commercial production is likely to start from Q2 CY13. Further, trucks with new platforms and engines are likely to be launched by Q4 CY13. A diversified business model, strong balance sheet, robust demand for motorcycle and strengthening commercial vehicle business make outlook favourable. Maintain Buy

Edelweiss Securities