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Fundamentals January 31, 2013

Nik's Diary
The Indian market opened flat today, mirroring flat opening to SGX Nifty and weak opening to most of the Asian markets. The US stocks ended modestly lower on Wednesday following the announcement by the Federal Reserve on the monetary policy. The Fed announced that it widely expects to keep interest rates unchanged and maintain its asset purchase program as part an effort to stimulate the economy. The comments from the Fed were backed up by a Commerce Department report showing that GDP unexpectedly fell by 0.1% in 4QCY2012 after surging up by 3.1% in 3QCY2012. Nonetheless, upbeat jobs data helped offset the negative sentiment generated by the GDP report, with payroll processor ADP reporting a bigger than expected increase in private sector employment in the month of January. ADP said private sector employment increased by 192,000 jobs in January compared to economist estimates for an increase of about 172,000 jobs. Meanwhile, Indian shares rose marginally led by index heavyweight, Reliance Industries after the company raised US$800mn from overseas investors via a perpetual bond sale. Going ahead, earnings news is likely to be in focus on Thursday. Additionally, traders are also likely to keep an eye on reports on weekly jobless claims, personal income and spending, and Chicago-area business activity.

Unity Infra projects bags ~`235cr road project in Maharashtra 
Engineering and construction company Unity Infraprojects BSE 3.84%  today said it has bagged a Rs 235-crore project in Maharashtra for construction of roads in Solapur.  "The company have been awarded the project for construction/Improvement of major roads in Solapur city under the scheme of Maharashtra Suvarna Jayanti Nagarotthan Mahaabhiyan Yojana Road Project, Phase -I," Unity Infraprojects said in a filing to the Bombay Stock Exchange. The project, it said, is sponsored by the state government and has been awarded to the company by Solapur Municipal Corporation. "The project is to be completed within a period of 18 months. The project value is Rs 234.96 crore," it added.Source: Economic Times



United Phosphorus-RU3QFY2013
For 3QFY2013, United Phosphorus (UPL)’ revenue grew by 20.5% yoy to `2,255cr and net PAT grew by 53.1% to  `173cr. The Management has maintained its positive revenue growth guidance of 15% and OPM (incl. other income) growth guidance of 19-20% for FY2013. For FY2014, also the company expects to post a high double digit growth. Even after factoring in  conservative numbers, the stock is quoting at an attractive valuation of 8.0x FY2014E EPS. We expect UPL to post a CAGR of 10.0% and 18.4% in its sales and PAT over FY2012-14, respectively. At current valuations of 8.0x FY2014E EPS the stock is attractively valued.Source: Angel Broking

KPIT Cummins-RU3QFY2013
For 3QFY2013, KPIT Cummins Infosystems (KPIT) reported in-line revenue numbers but operational performance of the company disappointed. Growth was sluggish due to lower billing days and shut downs of 2-3 days across the organization. For FY2013, the Management has maintained its USD revenue growth guidance of 32-35% yoy, which is 2.5x more than Nasscom’s guidance of 11-14% growth and includes ~US$45mn inorganic revenue from Systime.KPIT’s Management has maintained its FY2013 USD revenue growth guidance of a whopping 32-35% yoy (US$408mn-418mn), which is the strongest amongst its peers. On the PAT front, the company has revised its guidance upwards to 35-38% yoy growth to  `196-200cr. The company is growing ahead of other IT companies in terms of revenue; and on the operational front, the company’s performance has been improving since the last three quarters. KPIT has reiterated its positive tone and does not witness any delay in decision making. Hence, we expect the company’s revenue to post a CAGR of 21.8% and 28.5% in USD and INR terms, respectively, over FY2012-14E. On the EBITDA and PAT fronts, the company is expected to post a 31.6% and 32.0% CAGR over FY2012-14E. The stock is currently trading at 9.0x FY2014E EPS of `12.8. We value the company at 11x FY2014E EPS, which gives us a target price of `140.Source: Angel Broking

Sterlite Industries-RU3QFY2013
Sterlite Industries (Sterlite) reported  disappointing 3QFY2013 results. Both, the top-line as well as the net profit were lower than expected, mainly due to lower-than-expected performance from the Copper segment. We expect Sterlite to benefit from the expansion of Zinc-Lead smelting capacity during FY2013-14 although its Aluminium segment’s profitability is expected to remain under pressure. Considering the ongoing process
of group restructuring by the promoter, Vedanta Resources, the valuation of Sterlite will mirror the valuation of the consolidated company - Sesa Sterlite. On account of ban on mining in Goa, we had drastically cut Sesa Goa’s iron ore volume estimates for FY2014. Source: Angel Broking




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