CMP: RS 472.50

KOTAKSecurities maintained its buyrating on software services firm Mindtree Consulting, while terming its recent acquisition of Aztecsoft as “reasonable but unexciting proposition”. Mindtree has acquired a 32.57% stake in Aztecsoft at Rs 80 per share and will make an open offer for an additional 20% at the same price. “Acquisition price appears reasonable; however, we would have liked the company to emphasise on building capabilities on the enterprise (IT services) business which provides scalability, an inherent limitation within the R&D services business,” the Kotak Securities note to clients said. “We believe that a substantial improvement in revenue growth trajectory of the post merger R&D services business and a fine balance between the growth aspirations and strategy in the IT services and R&D services businesses remains critical to MT’s target of becoming a $1 billion company in the next 3-5 years (and consequently, to stock performance),” the note added.

TARGET PRICE: RS 760

CITI has initiated coverage on Reliance Communications (RCOM) with a buy rating. According to Citi, continued expansion of the wireless market and RCOM's ability to capture its due market share profitably will sustain over a longer term. According to the brokerage, the wireless business has maintained return parameters despite lower revenue yields. “Notwithstanding the narrowing of the leadership gap with Bharti, we believe that the dual network strategy carries inherent risks of cost duplication and execution which prompts us to retain the valuation discount. Higher than-average earnings growth and the low sensitivity of wireless demand to interest rates should continue to support premium valuations for the sector,” the Citi report said. The report, however, added that there are inherent risks in the execution of the dual network strategy (like cost duplication, low market share gains etc.). that cannot be wished away.

TARGET PRICE: RS 577

MORGAN Stanley has reiterated itsunderweight rating on real estate major DLF. It is unhappy with the company’s slower-than-expected execution of home/retail businesses and distant prospects for major commercialisation of mega townships. The brokerage has also tried to justify its ‘underperfomer’ rating by pointing out that the company is in very early stages of development of several lucrative projects. Morgan Stanley expects further NAV downgrades and wider NAV discounts by the street. At a 13% premium to current NAV, it estimates DLF is trading at a 40-50% premium to the sector