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Brokerage Recommendations

Monday, June 07, 2010

ICICI Direct Calls A Buy On SpiceJet

CMP: Rs 57       Target Rs 72

SpiceJet’s Q4FY10 revenues were marginally lower than our expectations. The company’s revenues grew by 34.5% YoY (-12.7% QoQ) to Rs 560.6 crore (I-direct estimates: Rs 586.1 crore) primarily due to a decline in market share (12.1% in Q4FY10 vs. 12.5% in Q3FY10 and 12.2% in Q4FY09). However, the EBITDA margin improved 540 bps YoY to 1.9% during the quarter. With strong operational results in the last two quarters (EBITDA margin of 15.9% in Q3FY10), SpiceJet reported full-year profits for the first time in FY10. SpiceJet reported a net profit of Rs 67 crore during FY10 (Rs 27.4 crore in Q4FY10) as compared to a loss of Rs 352.5 crore in FY09 (I-direct estimate: Rs 105 crore in FY10).

At the CMP of Rs 57, the stock is trading at 8.4x and 5.4x its FY11E and

FY12E EV/EBITDA, respectively. With an improved macroeconomic environment (GDP growth of 8.7% in Q4FY10) and expectation of stable crude oil prices during FY11E-12E, we re-iterate our STRONG BUY rating on the stock with a target price of Rs 72 per share, i.e. at 7x FY12(E), EV/EBITDA.

Fair Wealth Calls A Buy On Allied Digital
CMP: Rs 218    Target Rs 320

Allied Digital Services Ltd (ADSL) is a leading IT Infrastructure management and Technical Support Services outsourcing Company. It enables global, large and medium enterprises and service providers to reduce their total cost of ownership using a combination of onsite and remote services. It primarily acts as a support-partner for IT infrastructure products like desktops, laptops, servers, network software, routers etc.

At Current market price of Rs218, the stock is available at a P/E of 6.89x of its FY11E earnings, and 5.43x of its FY12E earnings. We recommend a BUY with target price of Rs 320, given that company’s future shows potential.




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