Hitesh Agrawal, Head of Research at Angel Broking analyses stocks that have been a hit and also those that have been misses.

Hits:

M&M and South Indian Bank

Mahindra & Mahindra (M&M) reported a good 36% topline growth while that was entirely unexpected considering the volume the company has been delivering. What surprised us was the sharp improvement in the operating margins, the improvement was over 900 basis points which could be attributed to couple of factors.

One is that operating leverage came into play as higher volumes came into play. Staff cost, other expenses as percentage of sales all fell. Apart from that consolidation Punjab Tractors with the company also led to cost synergies. Effectively reducing the cost of tractor by Rs 3,700 per tractor helped on the operating margin front which led to a sharp 185% jump in bottomline even adjusted for the exceptions. Their bottomline growth was 120% that was a good positive surprise which let us to upgrade the stock on full year basis in terms of numbers and a target price which now stands at close to Rs 1,070 per share.

Q: What is your target price in South Indian Bank?
A: With regard to South Indian Bank we have a target price of Rs 170 per share and that is primarily because of strong growth in bottomline of almost 40% led by strong advances growth which grew well above industry standards of 14%.

For South Indian Bank advances grew by 21% coupled with improvement in yield on advances from 11% to 11.7% which was a good surprise for us. Similar to other banking players, the cost of deposits have been coming down because of repricing of fixed deposits and that was on expected lines.

Q: Punj Lloyd is a miss for many people, would you sell it at this level? What is your price objective?
A:  We are not recommending a sell on Punj Lloyd because the order book is still at Rs 2,500 crore which his over 2 times FY2009 revenues, but we have reduced the target price for a little over Rs 300 to Rs 270 at this point in time. We expect Rs 1,600 crore topline and we expect an EPS of around Rs 18 for FY11. So Punj Lloyd is a buy with a price target of around Rs 270.

Disclosures:

I do not hold these stocks personally; it is safe to assume that my company and our clients would be holding the same.