Analyst corner

Sterlite Industries India, Zee Entertainment & Shree Cement

STERLITE INDUSTRIES INDIA
Reco price: Rs 108;
Target price: Rs 169
Sterlite Industries reported strong Q3FY12 results at the operating level with: 1) a strong copper business 2) a fall in production cost at Balco, Vedanta Aluminium (VAL) and the power business. Sterlite’s investments in VAL remain high at Rs 10,170 crore for its 29.5 per cent stake in the company. By analysts’ calculations, at debt/equity of 0.6 times, Sterlite has Rs 6,690 crore of surplus investment in VAL. The company has stated that VAL would be restructuring its capital structure in Q4FY12 and with that there would be more clarity on the surplus investments. Maintain buy.

Nomura Equity Research

ZEE ENTERTAINMENT
Reco price: Rs 118;
Target price: Rs 112
Zee Entertainment's Q3FY12 net profit grew 22 per cent YoY to Rs 139 crore, lower than analysts’ estimate of Rs 155 crore, largely due to higher finance cost and tax rate. Revenue was flat YoY and grew 5.1 per cent QoQ to Rs 750 crore, two per cent above analysts’ estimate. Ad revenue declined 10 per cent YoY to Rs 396 crore due to high base of sports related revenue in Q3FY11, weak macro environment and market share loss. Subscription revenue grew strongly by 12 per cent QoQ. Ebitda margin declined 30 basis points QoQ to 28.6 per cent. Analysts remain concerned on the margin outlook, given weak revenue growth and cost press-ures led by high competitive intensity. Maintain neutral.

MOSL

SHREE CEMENT
Reco price: Rs 2,227;
Target price: Rs 2,500
Shree Cement delivered solid Q3FY12 performance with adjusted Ebidta growing 119 per cent YoY to Rs 344 crore significantly ahead of street estimate. Ebitda/tonne at Rs 1,159 jumped two times YoY driven by higher realisation (up 33 per cent yoy to Rs 3,797/t, versus estimates of Rs 3,561/t), better product mix (cement volumes 98 per cent of total versus 88 per cent in Q3FY11) & cost control (up just 1.5 per cent QoQ to Rs 2,638/t). Maintain accumulate.

Emkay Global