Sesa Goa, Monnet Ispat & Energy Ltd, TVS Motors, HT Media
Sesa Goa
Reco Price: Rs 262, Target Price: Rs 326
As part of the Budget 2011-12, export duty on iron ore is proposed to be raised to a uniform 20 per cent from existing 5 per cent on fines and 15 per cent on lumps. Analysts estimate 2011-12 Ebitda impact of Rs 870 crore (16 per cent) and EPS impact of 11 per cent for Sesa Goa. Export duty rise further compounds problems for Sesa Goa, already reeling under concerns of a decline in volume growth and uncertainty on open offer for 20 per cent in Cairn India. Brokerages expect additional export duty to contract Sesa’s 2011-12 operating margin by 906bps to 49 per cent. Rise in export duty on iron ore and removal of 15 per cent duty on pellet is a move to incentivise investments in setting up more pelletisation capacity in India to domestically consume majority of iron ore fines. Over a period of time, this would reduce iron ore exports from India, which could provide strength to international iron ore prices. The current market price adequately factors in these concerns. Maintain buy.
—Pinc Research
Monnet Ispat & Energy Ltd
Reco Price: Rs 550, Target Price: Rs 593
Crisil Equities has assigned fundamental grade of 4/5 to Monnet Ispat & Energy Ltd (MIEL), indicating ‘superior’ fundamentals. MIEL is forward integrating into value-added products — plates and bar/structures — which will make it an integrated steel company. This will enable MIEL to gain from the expected rise in global demand for steel. The company has been allocated coal, coking coal and iron ore blocks, which will reduce its dependence on market purchases. MIEL has also forayed into power generation through Monnet Power Company Ltd, an 87.5 per cent arm, which is expected to operationalise a 1,050-Mw power plant by 2013-14. The power plant is expected to meet its raw material requirement entirely through captive coal blocks located in close proximity. Crisil Equities expects its standalone revenues to grow at a two-year CAGR of 29 per cent to Rs 2470 crore in 2011-12.
CRISIL Equities
TVS Motors
Reco Price: Rs 57, Target Price: Rs 46
TVS Motors’ February 2011 volumes marked good growth, both YoY and MoM, impressive, particularly after a disappointing January. Three-wheelers, scooters are the fastest-growing segments. For the month, TVS Motors reported volume growth of 24.3 per cent YoY (and 7.4 per cent MoM) to 177,412 units. The key volume drivers were three-wheelers (up 97.6 per cent YoY and 22.9 per cent MoM) and scooters (up 49.3 per cent YoY and down 1 per cent MoM). The motorcycles segment was once again the slowest-growing segment for TVS, with volume growth of 12.7 per cent YoY (and 5.5 per cent MoM). Exports rose 25.6 per cent YoY and 23.3 per cent MoM to 24,036 units. Maintain sell.
—Anand Rathi
HT Media
Current price: Rs 133, Fair value: Rs 175
HT Media has guided for healthy ad growth of 15 per cent in English and over 25 pre cent in Hindi segments. Pricing would drive the growth for HT Delhi and incremental volume growth, coupled with price improvement, would support ad growth for HT Mumbai. Turnaround of Mumbai edition and Mint breakeven in 2011-12 would support the higher margins. Also it is participating in Phase-III auction of radio frequencies. It is expecting to reduce the huge yield gap, compared to the market leader. It would be looking for 8-10 stations in the areas where it has print operations. However, the management has also indicated it would not go ahead if the auction prices go over the roof. Focus remains on the improving yields and volumes for the Mumbai edition. Reducing pricing gap with the closest competitors across the markets. Ebitda margins to see significant improvement after 2011-12, due to incremental losses from internet business to reduce gradually. Maintain buy.
—Emkay Global
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