Analysts' corner

BHARTI AIRTEL
Reco price: Rs 321
Current market price: Rs 306.50
Target price: Rs 400
Upside: 30.5%
Brokerage: Centrum Broking

Bharti’s December 2009 quarter performance remained flat due to sequential fall in RPM (revenues per minute) by 7.8 per cent to 52 paisa. However, mobile minutes registered growth of 6.7 per cent to Rs 15,300 crore on the back of elasticity from lower tariffs and lower base in September 2009 quarter. Revenue declined 0.7 per cent sequentially and grew 1.4 per cent year-on-year to Rs 9,770 crore. Increase in network costs and selling, general and administration costs depressed margins. EBITDA fell 6 per cent sequentially to Rs 3,900 crore and margins contracted 204 basis points to 40 per cent. The brokerage expects revenue performance to remain subdued in the March 2010 quarter, as RPM has not yet bottomed despite competition. At Rs 321, the stock trades at 12.1 times its estimated 2010-11 EPS.

SAIL
Reco price: Rs 216
Current market price: Rs 214.35
Target price: 156
Downside: 27.2%
Brokerage: Ambit Capital

SAIL’s December 2009 quarter net sales came in at Rs 9,697 crore, in line with estimates. There is 2 per cent drop sequentially led by a marginal decline in sales volume at 2.94 million tonnes (MT) compared with 3 MT. Realisations were steady, despite the various price cuts announced by SAIL in the quarter. Its EBITDA margins in December 2009 quarter improved 257 basis points sequentially to 26.6 per cent--on a per tonne basis, EBITDA increased by 10.5 per cent to Rs 8,770, led by significantly lower material costs as well as higher operating income. The quarter saw lower other income and higher interest expense compared with the trend in past quarters, negatively impacting the bottomline. Adjusted net profit at Rs 1,676 crore was flat sequentially. At Rs 216, the stock is trading at 8.3 times its estimated 2010-11 enterprise value to EBITDA and 12.2 times price to adjusted EPS.

Current market prices as on January 29