‘buy’ Zee Entertainment – Target Price Rs.150

 Buy rating on Zee Entertainment is maintained with a target price of Rs.150 over one year. The stock is currently traded at Rs.112 range.
 2QFY12 revenue has been lower as expected. However, EBITDA has beaten market
expectation because of lower costs.
 Advertising revenue declined by 4% yoy on weak ad spends, lower rating and lower sports
contribution. Subscription revenue also missed estimates due to accounting change.
 EBITDA margin has beaten market forecasts because of lower sports losses, accounting
change and cost efficiencies.
 Zee has lost viewership share in three of its key channels - Zee TV, Zee Cenema and Zee
Marathi. To counter this, Zee is increasing its programming hours on Zee TV and is looking
more aggressive in movie acquisition. This along with lower ad spend may impact near term
margins.
 However, subscription revenue will be benefited from digitization.
 Better subscription revenue and lower sports losses are expected to aid profitability of the company.
 Based on these assumptions, buy call on Zee Entertainment is maintained with a target price of Rs.150 over one year.
 At the current price of Rs.112 range, the stock is traded at 17.5 P/E of FY12 expected earnings and at 14.8 P/E of FY13 expected earnings.

Stock at Bottom Buy Aban

Aban Offshore – Target Price Rs.579

 Buy rating on Aban Offshore is reiterated with a target price of Rs.579 over one year.
 Aban Offshore is expected to charter four rigs by the middle of 4QFY12 as against the earlier expectation of 2QFY12. Tenders have been announced for two rigs.
 Potential re-charter of the ONGC rigs is expected to boost the cash flow clarity. Re-charter of rigs will reduce the uncertainty on FY12 and FY13 cash flows.
 EBITDA margin is expected to stabilize at 63% over FY12-14. However, EPS estimates FY12 –FY14 are cut due to conservation assumptions.
 Working capital requirements increased in FY11 due to payment delays. However, this would normalize at 80 days of revenue.
 Debt financing seems imminent but valuations look attractive. Even at a conservative approach towards re-chartering of rigs, it seems that there is upside potential to the stock from the current level because Aban is currently traded at its trough valuation.

Indian Market Push At Afternoon

The markets gained momentum in the afternoon after a subdued session in the morning and closed with substantial gains. IT and oil & gas led the rally and banking, auto and FMCG, too, played their part in supporting the indices. Realty, metal and capital goods closed with moderate declines. The Sensex closed at 17083, up 199 points from its previous close, and the Nifty shut shop at 5132, up 54 points. The CNX Midcap index closed with 0.4% gain while the BSE Smallcap index was up 0.3% in today's trade. The market breadth was negative with advances at 705 against declines of 718 on the NSE. The top Nifty gainers were Jindal Steel, Wipro, TCS and Bharti Airtel while the biggest losers included Sesa Goa, Tata Steel, DLF and Coal India.

TREND ON Q2 RESULT BUY SOBHA DEVELOPERS

 Buy recommendation on Sobha Developers is maintained with a target price of Rs.375 over
one year. The stock is currently traded in the range of Rs.203 range.
 Sales volume continues to increase and the company could maintain sales guidance.
 During 1HFY12, the company sold 1.6 million sq ft, a yoy increase of 13%.
 The company sold 0.94 million sq ft during 2QFY12 as against 0.74 million sq ft in 2QFY11 and 0.67 million sq ft in 1QFY12.
 Sobha is maintaining its contracted sales guidance of 3 – 3.5 million sq ft for FY12. In value terms, this is amounted to around Rs.1500 crore.
 NCR (National Capital Region) and Mysore (newer markets to the company) have contributed
12% of 1QFY12 sales.
 Bangaluru volume also recorded healthy growth of 23% yoy and 35% qoq. Average sales
price excluding NCR region recorded moderate 3% growth.
 Of the newly launched projects of 3.25 million sq ft, around 20% (0.65 million sq ft) is sold in 1HFY12.
 Contracted sale of Rs.790 crore in 1HFY12 is up 48% yoy. Current inventory is 4.5 million sq ft.
 Buy rating is maintained with a target price of Rs.375 over one year and it seems that
company’s entry in to new markets would drive growth while continued improvement in cash
flow driven by the residential segment and better execution may lead to a re-rating of the
stock.

VALUE STOCK BUY AT BOTTOM

Buy NTPC – Target Price Rs.204

 NTPC is recommended to buy with a target price of Rs.204 over one year. The stock is
currently traded around Rs.164.
 Company’s 2QFY12 performance is expected to be weak because of lower than expected
power generation in the quarter due to unforeseen disruption of operations in its Ramagundamand Korba power plants.
 However, the issues could be sorted out soon and operations would be resumed shortly.
Considering the disruptions, EPS estimates for FY12 has been reduced marginally.
 Disruptions in operations have weakened the stock price in the market and it seems that this is an attractive opportunity to accumulate the stock.
 Resumption of operations and capacity additions would drive the stock price up over a few months time. Additional capacity of 3.6 GW is expected to be added in FY12.
 The stock is well positioned in terms of fuel security at times of coal shortage. This coupled with strong balance sheet and earnings visibility, the stock appears to be a good defensive play.
 After the correction, valuation of the stock is also looking very attractive. At the current level, the stock is trading very close to the trough valuation. Currently, the stock is traded at 1.7 multiple of FY13 expected P/BV, which is lower than its seven year average.
 Risks to the target price are delay in completion of new power plants and lower plant availability due to fuel shortage.

BUY HINDALCO TARGET PRICE Rs.186

 Management has reiterated commissioning of Mahan project by December 2011. The project
is at an advanced stage of implementation.
 Operations at Renukoot and Renusagar projects are going smooth.
 Mahan project’s production guidance is 5 – 8% higher than market estimates.
 Mahan project’s coal block is expected to get environmental clearance shortly. The stock may be re-rated as it happens.
 Sharp decline in aluminium price due to volatile macroeconomic situation could be a major risk to the target price. However, this is unlikely to happen due to strong cost support and the company could sustain its earnings.