September 1, 2008
Sesa Goa
Current market price: Rs 158.75
Brokerage: Edelweiss Securities
Spot iron ore prices in China have dropped from $185/tonne in July 2008 to $160/tonne due to factors like shutting down of Chinese steel mills around key city areas in connection with Olympics and increased participation of Australian and Brazilian producers in the spot market.
Sesa Goa has however, not witnessed significant decline in volume growth. The company expects spot prices to rebound in Q3 FY08 as demand returns post Olympics.
Volume growth is expected to be 25-30 per cent for FY09 with total volume reaching up to 22.5 million tonne by FY10. This is proposed to be achieved using multi-modal transport in Karnataka as well as increased beneficiation capacity at Goa.
The company expects an 80 per cent increase in contract prices for FY09, which should help offset cost pressures in the current fiscal. The company is likely to undertake a project to expand pig iron and coke capacity to 1.0 million tonne per annum (mtpa) and 0.75 mtpa respectively. The plan may include some capacity for manufacturing alloy steel.
After obtaining export-oriented unit (EOU) status for its Goa and Karnataka operations, the company is currently attempting to obtain the same for its Orissa operations. The company has about Rs 250 crore in cash and proposes to utilise it largely to acquire iron ore mines, both in India and abroad. Maintain Buy.
Entertainment Network India
Current market price: Rs 293.20
Target Price: Rs 383
Brokerage: Prabhudas Lilladher
Entertainment Network India’s (ENIL) radio segment grew by 35 per cent, out-of-home segment by 320 per cent, and the event management business by 52 per cent in FY08.
Consequently, revenue grew by 76 per cent in FY08. Radio business is central to its profitability as both outdoor and events businesses are still at initial stages.
The company transferred its events management business from Times Innovative Media to a new subsidiary, Alternative Brand Solutions. The above restructuring can give focus to both outdoor and events business.
ENIL’s Radio Mirchi has maintained an average 48 per cent market share over the year. The company had operations across 32 stations in FY08 as against 10 stations in FY07. The rolling out of 22 new stations in eleven months signifies its execution capabilities.
The radio business had an operating margin of 23.2 per cent in FY08 and expects it to be 34.7 per cent by FY10 on the back of improvement in pricing for its legacy stations and higher utilisation of new stations. At Rs 299, the stock trades at 41.2x FY09E and 17.6x FY10E earnings. Maintain Buy.
Fortis Healthcare
Current market price: Rs 75
Target Price: Rs 88
Brokerage: ICICI Direct
Fortis Healthcare (Fortis) has been expanding aggressively through greenfield projects, acquisitions and management contracts. Going forward, the company plans to strengthen its position in the National Capital Region (NCR) and spread to the western and southern regions of India. Fortis announced the commencement of Malar Hospital, it had acquired in September 2007. The 258-bed multi-specialty hospital in Shalimar Bagh is expected to start operating by late 2009, while the Gurgaon medicity is expected to be launched in 2010. Fortis is set to benefit in the long-term from its metro-focused multi-speciality facilities with expertise in cardiac care.
For the first time, Fortis reported positive consolidated net profit of Rs 94 lakh for Q1 FY09. In FY10, expected bed expansion in their existing facility will lead to better asset utilisation. It must be noted that Fortis would be increasing its leverage for capex and future acquisitions.
The key risk to Fortis operations arises from the litigation surrounding Escorts Heart Institute & Research Centre and its subsidiaries.
The company is expected to generate an EPS of Re 0 |
