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Arshiya International Limited

Arshiya International Limited- AIL going strong with its FTWZ business- Margins and Profitability expected to improve.

Arshiya International (AIL) has pioneered the development and operations of a Unified Supply Chain Infrastructure and Solutions - comprising Free Trade & Warehousing Zones (FTWZ), Industrial and Distribution Hubs, Rail & Rail Infrastructure, Transport & Handling, Forwarding and Supply Chain Technology & Management. AIL has started its Khurja FTWZ with 2 warehouses and  it can be estimated that the company to ramp it up to 4 by end of FY13E. The company is already operating 4 warehouses at Panvel FTWZ and we estimate the company to ramp it up to 8 warehouses by end of FY13E.

In the rail segment the company operates 20 rakes currently which they would ramp up to 30 by end of FY13E. The company continues to grow steadily in its core third party logistics (3PL) businesses. The company is expected to deliver revenue CAGR of 24% over FY12 to FY14E to ~ Rs 16.…
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Infrastructure sector outlook

The third quarter FY12 numbers of the infrastructure companies were mixed bag with some of the companies disappointed on execution, margins and net profit front. Execution was likely to increase significantly from Q3FY12/Q4FY12 onwards, however it continued to remain below expectations due to adverse macro-economic scenario of high interest rates and delays in project approvals.Profitability was impacted by poor execution and continued high borrowings and working capital requirements.

Companies like IVRCL,NCC,BGR Energy and J Kumar Infra were impacted by these issues. However, IRB Infra, JP Associates, Unity infra and Pratibha industries outperformed market expectations.

Current order books remained healthy but execution growth was impacted due to very high interest rates or lack of funding to achieve financial closure or environmental clearance related issues. Companies like IRB Infra, JP Associates, Unity Infra and Pratibha industries reported excellent growth which was better than …

Areva T&D Demerger

Post the acquisition of Areva T&D by a consortium of Alstom and Schenider Electric, the operations of Areva T&D india have been bifurcated into transmission business (to be retained by Alstom group) and distribution business (to be transferred to Schneider Electric).
As part of the demerger scheme, the shareholder of Areva T&D will receive one share of the demerged company (to be named Smartgrid Automation Distribution and Switchgear Ltd) for every share held in Areva T&D.
Smartgrid Automation Distribution and Switchgear Ltd would be listed by the end
of January 2012. The stock became ex-date on Dec 14, 2011, following which the price corrected 24% to reflect the valuation of the transmission entity only.

Based on DCF calculations, the target price works out to Rs 158 per share, thus valuing at 22x CY12 earnings. The growth outlook for the T&D equipment sector continues to be weak given overall reduction in power and industrial sector investments pipeline in H1 FY1…

Punj Lloyd

Result Update: Punj Lloyd.

Revenues of Punj Lloyd for Q1FY12 reported a growth of 40% on consolidated basis as against same period last year. This was better than market expectation and led by improved execution. Operating margins witness an improvement on sequential and yearly basis and stayed at 7.4%.Company's profitability was impacted by increase in interest outgo which resulted in net loss for Q1FY12.

At current price of Rs 56, stock is trading at 8.5x P/E and 7.0x EV/EBITDA for FY12 respectively. For FY12,higher interest rates may continue to impact overall performance of the company. Due to high working capital requirements of the company coupled with high interest rates, the stock is expected to under-perform from these levels.

Bharat Electronics Ltd (BEL)

Bharat Electronics Ltd (BEL) Results update:

BEL posted strong set of numbers for the fourth quarter as the company managed to post its targeted revenue numbers for the year. For the quarter, margin expansion was aided by higher revenue booking (42% of full year revenue vs 36% in Q4FY10), change in product mix and absence of provisions for pay revisions.

Tax rate is lower possibly due to higher R&D expenditure. Even as the Capital Goods sector has struggled to book orders during the fiscal, BEL has won major orders. Resultantly, its order backlog has doubled in FY11, thus it is strongly positioned for driving revenue growth in FY13 and beyond. The company should also be a beneficiary from the offsets that are likely to accrue from the US$10 bn aircraft order that the Indian government is all set to place with Rafale or Eurofighter.

The company enjoys a dominant status in the defence sector and has a steady growth profile. At 16.2x, near-term valuations are close to the higher end …

Infosys Technologies

Result Update: Infosys Technologies:

Infosys' 3QFY11 results : Volume growth at 3.1% QoQ was below expectations. However, a 1.6% rise in average realizations were surprising. Margins came in line with market expectations.The guidance for a marginal growth in USD revenues in 4Q is predicated on the short term concerns about the global macro scene.

Infosys management has likely taken a conservative view of the short term challenges. On the other hand, management did indicate that CY11 may be a normal year for the industry with growth in mid - high teens. One can expect Infosys to grow at above-industry rates in FY12E.

Infosys has raised the revenue and EPS growth guidance for FY11, marginally. FY12E EPS stands at Rs.149 (INR - USD exchange rate at 45) and accordingly the price target works out to Rs.3620.
Infosys is benefiting from the positive change in client sentiments and the presence of various margin levers. Infosys' long term strategy is geared towards providing service…

Punjab National Bank

PNB has corrected sharply since its Q2FY11 results due to spike in slippage and due to loan scam along with rise in concerns over microfinance & 2G/3G lending by the banks (especially PSU banks).
It is better placed than its peers in rising interest rate environment with its strong liability franchise (CASA mix at ~41%) along with lower dependence on wholesale deposits.

Reported NIM for H1FY11 is ~4.0%, again on the higher side vis-à-vis its peers. This has come on the back of sequential improvement in yield on advances (31bps QoQ; driven by increase in PLR and base rate during Q2FY11) and containment of cost of deposits (due to better liability management).

the correction in stock price seems to be overdone and hence long term investors can buy this stock with a price target of Rs.1400.