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Tuesday, April 25, 2006

Credit Suisse - Emerging Markets Research

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Sun TV gains 67.5 pc on debut day

Impressive debut
Reliance Mutual Fund bought 4.2 lakh shares at Rs 1,207 per share on the NSE
The IPO of 68,89,000 equity shares was subscribed 46.92 times.
Only 10 per cent of its stake has been offered in the IPO.

Shares of Sun TV Ltd made their debut at Rs 1,111 on the Bombay Stock Exchange, 27 per cent premium to the issue price of Rs 875. The share price moved up to a high of Rs 1,500 and ended the trading session at Rs 1,466.05.

On the NSE, the shares were listed at Rs 1,000, moved up to a high of Rs 1,502.90 and closed at Rs 1,464.65.

Brokers and analysts tracking the sector said the stock price moved up on quick buying by institutional buyers.

Reliance Mutual Fund bought 4.2 lakh shares at a price of Rs 1,207 per share in a bulk deal on the NSE.

"Sun TV share price would settle at a realistic price in a couple of days. The IPO attracted a fairly good demand from institutional buyers. Those who got lesser allotment in the IPO were buying from the market today," said Mr Deepak Jasani, Head of Retail Research, HDFC Securities.

The IPO of 68,89,000 equity shares was subscribed 46.92 times. The retail portion was subscribed 2.9 times, that of non-institutional buyers 35.48 times and the portion for qualified institutional buyers, 70.8 times.

However, only 10 per cent of the company's stake has been offered in the IPO.

"As floating stock is very low, the share price moved up very sharply on buying support,'' said an analyst. "The share price at today's level looks quite stretched. Very few players barring FIIs would buy at these levels. The issue price of Rs 875 itself appeared big,'' said the analyst.

Attractive media

Nevertheless, Sun TV would be seen as an attractive media and entertainment stock for investors, analysts said. It has a profile close to the media and entertainment heavyweight Zee Telefilms Ltd, though the latter is considerably bigger and has a national presence.

Sun TV is part of the Sun Network, which runs 14 TV channels, four FM radio stations, two daily newspapers and four magazines.

The issue proceeds would be used to beef up Sun TV's subsidiaries, launch more TV channels, construct its own corporate office, set up studio facilities and up-linking infrastructure, purchase new equipment and upgrade existing ones.

"Sun TV's listing at a huge premium would definitely have a rub-off effect on other media stocks such as ZTL and NDTV. Media is one of the many sectors that appear buoyant at this juncture,'' said Mr Rahul Rege, Senior Vice-President, Sharekhan.

According to him, the fast moving consumer goods sector's upbeat performance would help the media industry, as there is a link between the two.

In Monday's trade, ZTL shares moved up by Rs 4.95 to Rs 247.05 on the BSE. NDTV moved up Rs 8.30 to Rs 270.35. TV Today rose by Rs 5.35 to Rs 105.50.

NDTV - KR Choksey

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Sugar Sector - B&K

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Sharekhan Investor's Eye

Navneet Publications (India) 
Cluster: Emerging Star
Recommendation: Buy 
Price target: Rs405
Current market price: Rs332

Results in line with expectations

Result highlights

  • The Q4FY2006 results of Navneet Publications (India) (NPIL) are in line with our estimates. The FY2006 earnings per share (EPS) were Rs19.41, in line with our estimated EPS of Rs19.21.
  • The net sales grew by 13.21% from Rs39.28 crore in Q4FY2005 to Rs44.47 crore in FY2006, helped by a 22.12% growth in the stationery segment. The same stood at Rs26.5 crore in Q4FY2006 as against Rs21.7 crore in Q4FY2005.
  • The operating profit grew by 20% from Rs3.1 crore in Q4FY2005 to Rs3.72 crore in Q4FY2006. The operating profit margin (OPM) improved by 48 basis points from 7.89% in Q4FY2005 to 8.37% in Q4FY2006.
    w Unlike in the last reported two quarters, the forex loss did not take its toll on the other income and ultimately the bottom line. 
  • The profit before tax grew by 50.71% from Rs1.40 crore in Q4FY2005 to Rs2.11 crore in Q4FY2006 and in the same period, the profit after tax (PAT) stood at Rs1.52 crore as against Rs1.21 crore in Q4FY2005, a growth of 25.62% year on year (yoy).

UltraTech Cement 
Cluster: Ugly Duckling
Recommendation: Buy 
Price target: Rs1,000
Current market price: Rs828

Cement prices does the trick

Result highlights

  • UltrarTech Cement's (UTCL) Q4FY2006 net profit at Rs81.8 crore was above our expectation. 
  • The net sales for the quarter have improved by 41% to Rs1,022 crore, helped by a 16.3% growth in the cement volumes and a 21% growth in the cement realisations. 
  • The operating profit margins (OPMs) for the quarter increased by 380 basis points to 18.8% primarily driven by the improvement in the cement realisations, which brought the operating leverage into play.
  • Helped by a 41% increase in the revenues and a 380-basis-point improvement in the OPMs, the operating profit for the quarter soared by an impressive 77% and stood at Rs192 crore. 
  • With a 15% drop in the interest cost, the pre-exceptional profit before tax for the quarter jumped by a whopping 238%. 
  • During Q4FY2005 there was a tax write back of Rs45.8 crore on account of the reduction in the corporate tax rate. Adjusting for the same the pre-exceptional net profit for Q4FY2006 surged by 127%. The reported net profit, which stands at Rs81.6 crore for Q4FY2006, registered a jump of 1,528%. 

At the current market price of Rs828 the stock is discounting its FY2008 earnings by 20x and its earnings before interest, depreciation, tax and amortisation (EBIDTA) by 12x. On enterprise value (EV) per tonne basis the stock is trading at attractive valuations of US$136 as compared to its peers, which are trading at close to US$160-180 per tonne of cement. With firm cement prices and the company's modernisation drive, we expect UTCL's earnings momentum to gather pace and register a compounded annual growth rate (CAGR) of 76.5% over FY2006-FY2008E. We believe the valuations are attractive in the wake of the strong earnings growth and the sharp improvement in the return ratios. We maintain our Buy recommendation on the stock with a revised price target of Rs1,000. At our price target UTCL will be trading at US$160 per tonne of cement, which is still at a discount to its peers