Emkay's outlook on 5 stocks post result

Emkay Global Financial Services has come out with a report on results updates of companies like Transformers & Rectifiers, M&M Financial Services, Sesa Goa, Ballarpur Industries and ACC.

Transformers and Rectifiers India: We believe that the company will witness pressure on its margins for few more quarters due to its strategy of submitting 400kv/765kv bids at a very low margin in order to gain foothold in the market. However, (1)with the company entering into big league of transformer manufacturers (Crompton greaves, ABB, Areva and Siemens) and (2) a capacity to deliver across ranges of transformers the stock is a due for a re rating in its valuations.

We upgrade our recommendation from Accumulate to Buy At the CMP of Rs282/share, TRIL is trading at 6.1x FY13E earnings, 3.2x FY13E EV/EBITDA and 0.9x FY13E book value of Rs318/share. Large transformers players currently trade in the range of 9-21x one year forward EV/EBITDA. We believe that TRIL is unlikely to trade those multiples on account of TRIL being standalone transformer player whereas others are full fledged service providers in the T&D sector. However, we believe that TRIL should be trading at a premium to the standalone transformer universe. We assign 5x EV/EBITDA to FY13E earnings (10% premium to transformers universe) and revise our PT upwards to Rs352/share (earlier Rs315/share)

M&M Financial Services: We have just marginally tweaked our numbers for FY12E/13E downwards by 1-2%. We believe that any spread contraction over next two quarters (then we expect them to plateau out) will be compensated by lower credit costs. We expect MMFS to do average RoEs of 23.5% over FY12-13E. Retain BUY rating on the stock with TP of Rs870.

Sesa Goa: At the CMP of RS 327, the stock is trading at 5x its FY13E EPS and 2.3x FY12E EV/ EBITDA. On SOTP basis, we value the iron ore business 4.5xFY13EV/ EBITDA and apply 20% discount to the attributable CAIRN India value to arrive at a target price of Rs 353/ share. We maintain HOLD rating on the stock.

Ballarpur Industries: We expect pulp prices to remain at elevated level and due to company

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