HT Media: Expensive valuations

ANALSYTS' CORNER

SSKI Securities has rated HT Media as an 'Underperformer'. The report states that HT's ability to withstand pressure from BCCL as well as DNA will decide its fate in the Mumbai market.

India's second largest print media player dominant in the north, has entered Mumbai, a viciously competitive market ruled by Bennett, Coleman and Company (BCCL). Though Mumbai's operations will expand HT's topline, the bottomline will affected in FY06.

The company's valuations are expensive at 62.3x FY07E earnings and earnings prospects look bleak, according to the report. The $ 1.7 billion Indian print media space is an mix of opportunities and restraints.

While about 20 per cent readership and lower ad spends vis-à-vis global standards make for high potential, lack of pan-India presence keeps away advertisers aiming for national coverage.

Excessive fragmentation has led to fiefdoms with players forced to aggressively protect their home turfs. This, along with reader stickiness to a brand, makes entry of new players difficult.

Hindalco Inds: attractive rights issue

Enam Securities rates Hindalco Industries as an 'Outperformer', relative to the sector. The company plans to issue equity for an amount not exceeding Rs 2,500 crore to the existing shareholders on rights basis to finance its large expansion/greenfield projects.

The ratio for the rights issue will be 1:4. The price per share for the rights issue would be decided at a later stage, subject to the approval from the relevant statutory authorities. The new equity shares would be issued in stages.

Apart from the several expansion plans, the company would implement greenfield Aditya Aluminium project, which involves setting up 1 million tpa alumina refinery (expandable to 1.5 million tpa), 260,000 tpa aluminium smelter (expandable to 3,25,000 tpa) and 650 MW power plant.

With the completion of these projects, Hindalco would have almost doubled its existing size of integrated alumina, aluminium and power operations.

The equity expansion is moderate and the inflows would ensure a stronger balance sheet to implement the company's robust growth pipeline.

Patni Computers: back on track

Edelweiss Securities research report points to a consistent improvement in business metrics of Patni. It states that the company has made rapid strides in derisking its revenue streams over the past two years through successful scale up in most of its revenue categories.

Patni was faced with an imperative to diversify its revenue base across geographies, clients and service lines, where the company has made marked progress.

Its revenues from newer clients, new services and its under penetrated European geography have consistently grown in line with its larger peers. The report expects ongoing successes for Patni in this area and believes the same will lead to a lower risk profile and improving profitability through the forecast period and beyond.

The company possesses the attributes of a scale player like learnability, investment orientation, experience in building business units from scratch, client acquisition and business unit level revenue diversification.