Buy stocks of eClerx Services; target of Rs 910

eClerx:-

“eClerx is a leading provider of data analytics, data audits and related services to global enterprise clients across industries. After its listing at the beginning of financial crisis in January 2008, the stock price has seen extreme movements. First it slumped towards its all time lows around Rs48 and then embarked upon a spectacular multi-fold rally during 2009 to July 2011 to hit its life-time high of Rs875. Post the July 2011 high, the stock embarked upon a year long correction to hit lows of Rs570 by June 2012. This price decline has occurred in a well defined mildly declining channel formation as highlighted in the adjoining weekly candlestick chart. Recently, the stock price posted a bullish upward break out from this falling channel around Rs740 accompanied by rising volumes.”

“From a technical perspective, this is a bullish signal for future price movements. According to the classic theory, price implication of a channel breakout is measured by adding the price range of the consolidation to the breakout level. In this case, the range of the channel (774-600 = 174 points) added to Rs740 projects the price target of Rs914. We expect the stock price to scale to its projected price target with some temporary hurdle in the vicinity of its life-time high of Rs875 levels. During the recent climb, the stock price has marched above its all medium and long term moving averages and is forming rising peaks and troughs indicating a bullish trend. Among momentum oscillators, the 14 week Relative Strength Index (RSI) has climbed upon its bullish territory indicating strength from a medium-term perspective.”

"Accumulate eClerx in a staggered manner in the range of Rs 770-787 for a target of Rs 910 with a stop loss below Rs 714 on a closing basis,” Says ICICIdirect.com research report.

Buy stocks of Supreme Infra; target of Rs 365

Supreme Infra:-

“Supreme Infra has registered revenue growth of 32.2% yoy to Rs. 4,362 mn, showing the execution strength of the company. This strong execution was seen in the road projects viz., Manor Wada Bhiwandi, Ahmednagar Karmala and Panvel Indapur. During the quarter we saw a decline in EBIDTA margins which stood at 16.1% down by 59 bps yoy, primarily due to higher construction expenses as a percentage of sales which went up by 929 bps yoy at 82.1%. during the quarter PAT margins were down by 183 bps yoy at 5.9%, primarily down due to rise in borrowing cost by 74% yoy and rise in effective tax rate by 600 bps yoy at 28.0%.”

“The present order book stands at Rs 43,758 mn including L1 of Rs 9,996 mn which stands at 2.9x FY12 sales. During the quarter SIIL, added orders worth Rs. 11,456 mn. The closing order book has been divided into 50% road, 7% bridges, 1% railway, 37% building, 5% water and balance power. The Company has achieved the financial closure for 9 BOT projects except for the new 10th road BOT project bagged (Kotkapura-Muktsar Road) during Q1FY13 in JV with SPML Infra based out of Punjab. Of the total 10 BOT projects currently 3 projects are operational viz-Kasheli Bridge Patiala Malerkotla and Nagar Kopargaon. During FY13 the company will have 1 Road BOT viz Manor wada Bhiwandi which is expected to get completed and start the operation. Total Equity requirement for 10 road BOT projects is Rs. 7,500 Mn of which Rs 3,800mn has been infused by Supreme Infra while; 3i Capital will infuse Rs. 3,060 mn and balance Rs.640 mn to be infused over the next 36 months by the company.”

“The company is well poised to capitalise on the opportunities of govertment spending on infrastructure. In view of the growing order book, efficient execution of ongoing projects, backward integration and improving track record, we expect the company’s top line to grow at a healthy CAGR rate of ~21% during FY12 to FY14E. At current market price of Rs 278 the stock is trading at a P/E multiple of 4.4x and 3.6x to its FY13E and FY14E EPS of Rs. 63.8 and Rs. 76.4 per share. We maintain buy with a target price of Rs. 365 per share with an upside of 31% based on SOTP method. For the construction business we arrive at a price of Rs 319 per share which discount FY13E EPS of Rs 63.8 by 5x. For BOT projects viz., Manor-Wada-Bhiwandi (MWB), Kasheli Bridge (KB), Nagar Kopargaon (NK) and Patiala Malerkotla which are valued on DCF basis which gives a NPV of Rs 46 per share,” says BP Equities research report.

Buy stocks of J Kumar Infra; target of Rs 219

J Kumar Infra:-

"J Kumar Infra has registered a subdued revenue growth of 2.9% yoy to Rs. 2,110 mn during Q1FY13 primarily due to slower execution of projects. Execution is expected to pick up in the 3rd & the 4th quarter of FY3. Management has guided a topline of Rs. 12bn for FY13.  During the quarter EBIDTA margins went up by 100 bps yoy to 15.8% primarily due to reduction in raw material cost as a percentage to sales by 249 bps yoy to 77.5%. JKIL has backward integration model which has helped them to maintain higher margins. Management has guided a EBIDTA margin of >15% during FY13.  PAT margins for the quarter remained flat at 7.3% yoy mainly due to rise in interest cost as a percentage to sales by 44 bps yoy to 3.1%. Management has guided a PAT margin of >7% during FY13. Average cost of borrowings for the company during the quarter stands at 12-13%.”
“Order book of the company as on 30th June 2012 stands at Rs. 48.4 bn (including L1 order of Rs 8bn) which translates into 5.2x FY12 sales. The order book comprises of transportation engineering - 85%, irrigation - 2%, civil construction - 13% & piling work - 1% as on Q1FY13. Geographical break up of order book stands at Maharashtra - 53%, Delhi - 33%, Rajasthan 11% & Gujarat 3%. Order book from the govertment clients stands at 69% while that from the private clients stands at 31%. Recently the company secured a prestigious award from DMRC for Delhi MRTS project phase III worth ~Rs. 14 bn for design and construction of tunnel by shield TBM, tunnels, stations and ramp by cut & cover method. The order has been secured in JV with China Railway Third Group having 26% stake while the balance 74% stake is held by the company. For this project the company is expecting a EBIDTA margin of ~15% and a PAT margin of ~8-10%. The projects are expected to get completed in ~36-42 months.”

“We expect the company to register a CAGR of ~30% from FY12 to FY14E on the back of healthy order book and strong execution track record. At the CMP of Rs.185, the stock is trading at a P/E of 5.9x & P/Bv of 1.0x to its FY13E EPS of Rs. 31.2 & BV of Rs. 189.5 respectively. We recommend buy and assign a P/E multiple of 7x (20% discount to peers’ average) to its FY13E EPS of Rs. 31.2 and arrive at a target price of Rs. 219 which provides potential upside of ~18%,” says BP Equities research report.