Puravankara Projects PVKP IN -- BUY : Nomura Research

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Puravankara’s 2QFY12 PAT at INR265mn (-26%y-y & -15%q-q) missed both our own as well as consensus estimates by 28% and 13% respectively, on account of lower-than-expected revenue, higher interest /tax expense & loss from associates. We expect a negative reaction to this set of headline numbers on the back of an operationally weak quarter, lower-than-expected profits and rise in gearing. However, we expect cash flow visibility to improve in FY12/13F as the company will be launching ~4.6mn sq ft in Bangalore, where absorption has remained stable in the current macro environment. Maintain BUY.

Tech Mahindra : Sharp drop in margins and weak outlook at BT: Nomura Research

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Sharp drop in margins and weak outlook at BT
Fear of sharp cuts in BT revenues plays out earlier than anticipated


Action: 5% q-q decline in BT & more likely to come; maintain Reduce
 Revenue from BT declined by 5% q-q in 2QFY12 on account of project
closures. There appears to be severe pricing pressure in the BT
business, as management has indicated that both revenue and margin
would be impacted in the near-term despite Tech Mahindra having
retained large portions of its business and gaining market share in the
re-tendering process. We were earlier anticipating a ~10% decline in BT
revenues in FY13F – which we now expect will occur in FY12F.
 2Q results were disappointing operationally as the margin decline of
340bps q-q was sharper than our expectation. We maintain our Reduce
on Tech Mahindra on account of 1) a weak near-term revenue and
margin outlook; 2) the absence of a pickup in discretionary spending in
Telecom; and 3) increasing skew in TechM’s business mix towards the
low-margin BPO/emerging markets business.
Valuation: Cutting multiple to10x; TP reduced to INR580
We cut our TechM standalone EPS estimates by 21%/5% in FY12F/13F
on account of an earlier-than-anticipated drop in BT revenues. Our FY13F
EPS estimates are marginally higher on increased Satyam contribution
stemming from the 2Q outperformance and a better margin outlook. We
reduce our valuation multiple to 10x FY13F (from 11x) on 1) balance sheet
deterioration; and 2) the likelihood of sustained margin pressure due to
skew in the business mix. Our TP declines to INR580 (from INR620).
Catalyst: Sharper declines in BT business and no pickup in
discretionary demand

NTPC : Preferred IPP on relative fuel/payment security : Nomura Research

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Preferred IPP on relative fuel/payment security
Adjusting estimates post clarity
on 2QFY12 ‘normalised’ financials


Action – Maintain Buy; forecast/TP adjusted for 1HFY12 financials
Incorporating its 2QFY12 financials (at Rs20.4bn, normalised PAT was
7% above our forecast), we tweak our FY12-14F normalised EPS forecast
for NTPC by ~2%. We maintain that ~9GW wholly owned commercial
capacity addition by March 2014, yielding FY12F-14F EPS CAGR of
~13%, will likely underpin price performance.
Valuation – Stock trades ~20% below historical average multiples
Our TP of INR206 is a sum of the fair value of operating assets based on
a residual income model (INR176), investment in JVs/subsidiaries
(~INR10) and book value of FY12F non-operating financial assets
(~INR21). Our TP implies FY13F P/BV at 2.1x (10% below its historical
one-year forward P/BV of 2.3x).
Catalysts: 5GW addition in 18 months; captive coal block restoration
Event-linked catalysts: 1) Restoration of the five de-allocated captive coal
blocks by the MoC; 2) acquisition of equity stakes in overseas coal assets
/ securing long-term imported coal supply; and 3) bulk-tendering orders
award by March 2014 to fructify FY2016-17F capacity growth prospects.
Preferred IPP pick; ~20% RoE on regulated assets seems sustainable
As fuel constraints rise across the board, we maintain that among the
IPPs under our coverage, NTPC offers high earnings visibility, the lowest
funding risks and adequate fuel security (particularly as pricing is a passthrough).