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Summary
of Contents
STOCK UPDATE
Tata Tea
Cluster: Apple
Green
Recommendation: Buy
Price target:
Rs1,040
Current market price: Rs798
Analyst meet takeaways
We attended the analyst meet organised by Tata Tea
Ltd (TTL) last week after the acquisition of Energy Brands Inc (EBI)
by the company. Even though the recent acquisitions of TTL have
helped the company transform itself into a splendid branded beverage
play, we believe that the funding issues with regard to the latest
acquisition (EBI) will act as an overhang on the stock in the short
term.
In the analyst meet, the management of TTL indicated
that EBI's revenues for CY2005 were at $175 million instead of $350
million as was stated earlier. This puts the valuation of EBI at
12.4x its CY2005 revenues against the earlier valuation of 6.2x.
SECTOR
UPDATE
Cement
Subdued growth
numbers
For the month of August 2006 the cement majors have
registered a subdued growth in cement dispacthes, primarily because
of the incessant floods in the states of Maharashtra, Gujarat,
Rajasthan, Andhra Pradesh and Madhya Pradesh. For example, ACC's
cement dispatches for the month of August 2006 grew by 3.8% to 13.5
lakh tonne. Gujarat Ambuja, the most affected player, has reported a
4% decline in its dispatches to 9.39 lakh tonne. This is because its
primary markets like Maharashtra, Gujarat and Rajasthan, witnessed
heavy floods. However, the AV Birla group, which includes UltraTech
Cement and Grasim Industries, reported a 4.9% growth in the cement
dispatches. This is primarily because the group as a whole is
dominant in the central, southern and eastern regions, where the
rainfall was pretty normal.
Media
Rate ceiling negative
in short term
We believe that the ceiling rate of Rs5 per channel
per subscriber per month fixed by the Telecom Regulatory Authority
of India (TRAI) is negative for the broadcasters, especially the
niche channels like the sports and news
channels.
However, we believe that in the longer term,
the implementation of the conditional access system (CAS) itself
would be a big positive for the broadcasters. TRAI has put the
implementation of CAS on fast track after an order by the Delhi High
Court. With its initiatives on clearing the operational glitches in
the way of the implementation of the system, the government's strong
commitment towards the same is becoming apparent. This will
definitely help the broadcasters as the current practice of
under-declaration of subscribers will be a thing of past under the
CAS regime.
We expect the broadcasters to renegotiate the
prices with TRAI as the current price ceiling of Rs5 seems too low
especially for the niche channels where the differentiation in the
content and channel positioning is most
important. |
