Analysts' corner

Tata Motors, Jagran Prakashan & Tulip Telecom

TATA MOTORS
Reco price: Rs 273
Target price: Rs 272
As per media reports, Tata Motors has placed a bid for assets of the bankrupt Swedish carmaker, SAAB for around $350 million. According to SAAB officials, the company has received at least five bids, mostly from outside Sweden. Tata Motors declined to comment. SAAB, a premium car maker, has been in losses for over a decade now and its CY10 volume of 28,284 units is a fifth of the peak achieved before the credit crisis. If Tata Motors goes ahead with the acquisition, it would strain cash flows of JLR in the near to medium term as it has to invest heavily in product development. However, long-term benefits would accrue from building scale for Jaguar+SAAB and expanding the geographical reach. Hold.

Edelweiss Securities

JAGRAN PRAKASHAN
Reco price: Rs 102
Target price: Rs 104
Jagran Prakashan’s (Jagran) flagship daily, Dainik Jagran, enjoys strong brand franchise in key Hindi markets of Uttar Pradesh (UP), Bihar and Jharkhand and Punjab. Competitive intensity continues to increase in Jharkhand and UP, which would moderate revenue growth even as costs increase. Besides these three markets, Jagran has made limited investments for long-term growth of its print media business. Lower investments lift profitability metrics in the short-term but its medium-term growth would trail that of its peers. Weaker earnings growth outlook warrant a valuation discount to peers. Reduce.

IIFL

TULIP TELECOM
Reco price: Rs 99
Target price: Rs 100
Spread over 900,000 square feet, Tulip Data City has the capacity to host 12,000 racks (600 racks x 20 plates) and would use peak power of 100Mw. While analysts are impressed by the state-of-the-art facility and Tulip’s timely execution, they believe ramp-up in utilisation would be critical towards improvement in cash flows. Analysts expect interest outgo to increase with an increase in debt funding. At current debt-equity levels, the balance sheet is stretched. Further clarity on how quickly Tulip can announce order wins and increase its utilisation will be a key factor to watch out for. The stock trades at 5.2 times FY13 estimated EPS and at an Enterprise Value of 4.5 times FY13 estimated Ebitda. Maintain Neutral.

Motilal Oswal Securities