Accumulate CMC; target Rs 1050: P Lilladher

Prabhudas Lilladher is bullish on CMC and has recommended accumulate rating on the stock with a target price of Rs 1050 in its July 12, 2012 research report.

“CMC reported Q1FY13 results touch ahead of our/consensus expectation at top-line. However, the strong performance at the bottom-line was led by a margin surprise, higher other income and lower tax rate. The strong growth in SI is also aided by the currency; moreover, the weakness in ITES remains a matter of concern. The margin profile continues to be volatile due to continued investment in the business. We reiterate our ‘Accumulate’ rating, with a revised target price of Rs1,050 (from Rs1,140) as we cut our multiple due to growing uncertainty around demand.”

“CMC reported revenue growth of 10.3% QoQ to Rs4.5bn (PLe: Rs4.5bn, Cons: Rs4.2bn). However, excluding SEZ, top-line grew by 9.1% QoQ to Rs4.4bn. EBITDA margins expanded by 198bps QoQ to 16.6% (PLe: 15.6%, Cons: 14.3%), due to currency depreciation & cost optimization. PAT grew 36% QoQ to Rs584m (PLe: Rs463m, Cons: Rs428m), due to other income of Rs57.1m (PLe: Rs25.4m) and tax-rate of 22.6% (PLe: 29%). We expect the revenue momentum to stay in the mid-twenties, with stable margin profile. We reiterate ‘Accumulate’, with a target price of Rs1,050, 14x FY13E earnings estimates,” says Prabhudas Lilladher research report.

Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

To read the full report click on the attachment

Read More