Analysts' corner

Bharti Airtel & Sobha Developers

BHARTI AIRTEL
Reco price/date: Rs 344/September 23;
Current/target price: Rs 335.05/Rs 370
With operations spanning 19 countries and five business segments, Bharti faces unique challenges in coming up with an all-round robust financial performance. The improving outlook with regard to competition and realisations in India helps; yet, weak operating trends in Africa and a constrained revenue-growth outlook in India for its non-wireless businesses (especially Infratel, Telemedia) would pose challenges. While earnings should grow rapidly on the low base (a 61 per cent CAGR over FY13-15), meaningful recovery in RoE and FCF would be a task, especially with the spread of operations continuing to take a toll on execution capabilities (top management changes, business-units re-organisation). With revised target from earlier Rs 315. Maintain Hold.

-Anand Rathi Research

SOBHA DEVELOPERS
Reco price/date: Rs 282/September 21;
Current/target price: Rs 276/Rs 422
Sobha has a large, diversified and quality land bank, which together provide growth visibility for the next several years. The company is maintaining a steady pace of new launches and pre-sales, which should ensure near-term cash flows and execution scale up. The research firm has updated project prices and execution schedule in line with current market conditions with a new net asset value (NAV) of Rs 592 a share for FY14 and new price target of Rs 422 a share (35 per cent discount to NAV, plus contractual business).The stock has corrected 26 per cent over the last three months, largely on a worsening macro-environment and its possible impact on residential demand. However, the concerns seem overdone. Bangalore continues to witness stable demand/supply momentum, SDL's products have a healthy buyer mix, it has healthy operational cash flows, and it continues to scale-up its operations. This makes the company very attractive at current valuations - 11x F2014e P/E and 52 per cent discount to March FY14 NAV. Overweight.

-Morgan Stanley