Analysts' corner

Jubilant Life Sciences, Mahindra Holidays & Tata Communications

JUBILANT LIFE SCIENCES
Reco price/date: Rs 120/July 10;
Current/target price: Rs 120.60/Rs 162
We are cutting our target price to Rs 162 from Rs 234 on the back of two reasons - unfavourable rupee and China imposing anti dumping duty on Pyridine. From our earlier recommendation, the rupee has depreciated around 10 per cent vis-à-vis the dollar and the stock has declined 26 per cent. We now value the stock at 3.8x FY15E EV/Ebitda, 70 per cent discount to Divi's. Jubilant is one of the few stocks in the pharma space, which is negatively impacted by rupee depreciation due to huge foreign currency denominated loans. As on March 31, it has debt of around Rs 3,788 crore. According to the management, every one rupee depreciation vis-à-vis the dollar will benefit the company to the tune of Rs 12-15 crore at the Ebitda level. However, it needs to book MTM loss of Rs 40-45 crore on forex debt. Buy.

-icici direct

MAHINDRA HOLIDAYS
Reco price/date: Rs 255/July 9;
Current/target price: Rs 251/Rs 308
We estimate the company to add about 500 rooms in FY14. After marking its presence in Dubai and Bangkok in FY13, the company is aggressively looking to expand its footprint to Sri Lanka. Management expects approval for its Tungi resort (Mahabaleshwar) in one-two weeks. It also added a new category (Blue/White, Rs 1.5-1.6 lakh) targeting senior citizens and added 600 members under it in Q4FY13. We believe MHRL is through with the consolidation phase as it has achieved the optimal 60x member-to-room ratio; 92 per cent rooms are provided to members; hassle free online booking; stable cash flows; consistent inventory addition and stable member additions. We value MHRL using average of DCF methodology, P/E multiple and EV/Ebitda multiple, further reduced by Rs 35 a share to incorporate unearned revenues, leading to a target price of Rs 308. Maintain 'BUY'.

-Edelweiss Securities

TATA COMMUNICATIONS
Reco price/date: Rs 173/July 8;
Current/target price: Rs 175.95/Rs 150
Tata Communications (TCOM) expects voice traffic to grow at mid-double digits and data traffic to show a strong 50-60 per cent growth in the medium term, mainly led by stable voice demand and rapidly rising data usage. However, TCOM believes that pricing decline (particularly on data, at 15-20 per cent p.a) is likely to continue given industry capacity utilisation is still not high, as many cable networks are operating at low lit capacity. TCOM's lit capacity is 19 per cent, and it can activate remaining capacity on demand without material increase in costs. Management believes Ebitda margins should show continued gradual improvement in the next one-two years mainly led by steady revenue growth and tighter cost control. TCOM is targeting full year PAT breakeven in FY15E (in-line with our estimates). TCOM is separating its data centre business into a separate entity (expected to be completed in 3Q), and is planning to add more capacity as it has started seeing a rapid increase in data-centre demand over the past few months. TCOM expects to bring down its net debt/Ebitda to three times in the next one-two years (from 4.5 times in FY13) led by steady Ebitda growth and flat capex requirements. Maintain Sell.

-Goldman Sachs