Sun TV
Reco price: Rs 402
Target price: Rs 497
Sun TV Networks (STNL) is a leader in three out of the four lucrative southern TV markets through its bouquet of 20 channels across genres. The brokerage has factored in 23.5 per cent, 24.9 per cent and 25.3 per cent compounded annual growth rates (CAGRs) in the top line, core Ebit (earnings before interest and taxes, post amortisation) and earnings, respectively, for STNL over 2010-12E (estimated). Beyond broadcasting, the key factors to look for would be a reduction in operating losses aided by revenue traction and cost curtailment in radio subsidiaries – Kal and SAFM (which has factored in near breakeven in FY12E at operating level) – and contribution from the big budget movie, Endhiran. It is estimated that STNL’s cash balance will swell to a whopping Rs 1,000 crore (around Rs 33 a share) in FY12E. At Rs 402, the stock is trading 19.4x FY12E earnings.
Maintain buy.
— Angel Research
Dhanlaxmi Bank
Reco price: Rs 163
Target price: Rs 200
Dhanlaxmi Bank reorganised its business to increase focus on each of three segments — large and mid sized companies, small and medium enterprises (SMEs) and retail. Further, resumption of branch expansion, a three times increase in employee base, new launches, fee income initiatives and marketing efforts ensure the bank is at the cusp of an operational transformation. The bank's expected loan book is likely to grow at a CAGR of 61 per cent over FY10-12E. Focus on higher yielding SMEs and retail loans, along with equity raising in FY11E, should lead to a 40-basis-point (bp) expansion in margins from 2.1 per cent in FY10 to.2.5 per cent by FY12E. Driven by strong return on assets (RoA) expansion to 77 bps and assets CAGR of 61 per cent, expect earnings per share (EPS) to register a 106 per cent CAGR over FY10-12E.
Maintain buy.
— JM Financial
Idea Cellular
Reco price: Rs 55
Target price: Rs 70
The brokerage captures Rs 7 a share ‘negative’ net present value from 3G. Idea’s 3G footprint is most optimal compared to others, given higher ‘own revenue coverage’ (79 per cent) and low spectrum cost (41 per cent of revenues). Further, the pullout from broadband wireless access (BWA) auction due to high prices, is a rational move. Finally, thesis of operational out-performance versus peers remains intact, with increasing signs of stability in the industry pricing, and likely earnings before interest, taxes, depreciation and amortisation (Ebitda) loss reduction in Idea’s new circles starting in the first quarter of 2010-11. The brokerage revised the target price to Rs 70, and is derived after factoring potential value erosion of Rs 6 per share from latest Trai recommendations (assuming 50 per cent probability of implementation). With 28 per cent upside potential and superior growth outlook versus peers, upgrade Idea stock to a buy.
— Anand Rathi Securities
Tulip Telecom
Reco price: Rs 853
Target price: NA
The management indicated the new BWA players’ focus could be retail centric, targeting the larger mass market, unlike Tata Teleservices Ltd (TTSL) that is catering only to the enterprise segment. In this context, TTSL does not envisage a material threat to its current enterprise customers. The brokerage is positive on TTSL’s IP-VPN (internet protocol-virtual private network) business growth and believes the recent fibre rollout is likely to enhance the company’s addressable market and realisations/margins. The stock valuations at a price-to-earnings (P/E) ratio of 9.4x and 8.6x and enterprise value (EV) to Ebitda of 5.5x and 4.9x FY11E and FY12E, respectively, reflect most of the investor concerns on rising competition and potential price cuts. The stock is trading below its long-term one-year forward P/E of around 12x.
Maintain buy.
— Edelweiss Research
