“Mphasis 1QFY10 results were in line with expectations, excluding impact of higher than anticipated forex gains on revenue and other income. EBITDA margins were in line with expectations at 26.3% (v/s est. of 26.4%) and profits were flattish, excluding impact of forex gains. The stock quotes at P/E of 13.9x FY10 (YE Oct) and 13.3x FY11 earnings. We downgrade the stock to Neutral, with a target price of Rs 710, based on 14x FY11 earnings. We expect pricing cut from its parent HP and uncertainty on applications pricing going forward to weigh on the stock in the interim. Lower than anticipated pricing declines can provide upsides to our estimates, “says Motilal Oswal research report.

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Motilal Oswal has maintained its buy rating on Hero Honda Motors with a price target of Rs Rs 1,275 in its April 16, 2009 research report.

“Hero Honda offers the best earnings growth (26% in FY10) visibility in the auto industry, driven by ramp-up at Haridwar, including increase in vendor localization, and lower commodity prices. Despite just 6% volume growth, we expect the above drivers to lead to 190bp improvement in EBITDA margin. In the domestic market, Hero Honda has grown at 11% in FY09 v/s industry growth of 1.2%, resulting into a 530bp gain in market share to 60% – its highest ever. The company has been less impacted by the macro and competitive headwinds due to its focus on rural markets and tie up with regional NBFCs for financing.”

“We like Hero Honda because of its (1) dominant position in 2-wheelers, (2) multiple drivers to earnings, (3) 26% EPS growth in FY10E, and (4) strong balance sheet with Rs 242/ share in net cash. The stock trades at 17.1x FY09E EPS and 13.6x FY10E EPS. We believe the stock deserves premium valuations. Maintain Buy with target price of Rs 1,275 (@ historical median P/E of 16x FY10E EPS) – an upside of 18%,” says Motilal Oswal’s research report.

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