Analysts' corner: Tata Motors

DSP Merrill Lynch recommends a "buy" on Tata Motors. The report expects re-rating of the stock on the back of higher growth visibility in commercial vehicles and value unlocking in subsidiaries.

The company is expected to deliver a 21.1 per cent consolidated earnings CAGR over FY06-08E (after 13.4 per cent in FY06E), which represents the high end of growth within automobile OEMs.

The company is likely to deliver 13 per cent volume CAGR over FY06-08E, on a 14.9 per cent CAGR in commercial vehicles (buses, light carrier Ace and heavy tonnage trucks especially off-highway application vehicles) and 25.3 per cent in aggregate exports.

While being bullish on passenger vehicles, the company may lag the industry with a slower CAGR of 7.3 per cent. The report forecasts for deterioration in sales mix, thereby factoring restriction in margin expansion.

High contributing rigid trucks will exhibit secular declining volume trends, but will be compensated by heavy vehicles (long haulage and off-highway) and buses. On the other hand, accelerated growth in light carriers and exports will more than make up for the relatively lower margins.

Television Eighteen

Edelweiss Securities maintains its "value buy" recommendation on Television Eighteen. The report states that the final restructuring plan unveiled by the company entails a larger dilution in non-promoter shareholding than previously envisaged, which is negative.

This is the result of the exercise to fulfil the requirement of keeping promoter holding above 51 per cent, while providing sufficient cushion for future Esop dilutions and implies a market-linked valuation for CNN-IBN, which is not appropriate according to the report.

For every 10 shares (face value Rs 10) of TV18 pre-restructuring, the shareholders will get 14 shares of TV18 (Rs 5) and 12 shares of Network 18, the new holding company (face value Rs 5).

Effective non-promoter shareholding in TV18 and Awaaz has come down to 66.4 per cent from the ideal 79 per cent, while the effective holding in CNN-IBN has come down to 34.9 per cent from the ideal 58.5 per cent.

While the report shows disappointment with the final shareholding post restructuring and believes this will have an impact on the discounting that TV18 commands, it is likely to be made up on the earnings front by the strength in the business.

Petronet LNG

Brics PCG Research recommends a "buy" on Petronet LNG. In line with its expansion plans, the company has finalised the contract for enhancing the capacity at its Dahej terminal in Gujarat.

A Japanese consortium led by Ishikawajima-Harima Heavy Industries Co (IHI) has won the $258.4 million contract, under which it will design and build a facility to double the liquefied natural gas capacity at Dahej to 10 million tonnes a year. The contract is expected to be signed in mid-January.

The company has set up India's first LNG receiving and regasification terminal at Dahej at a cost of $550 million. The terminal was designed to handle a nominal capacity of 5 MMTPA initially, which is equivalent to 20 MMSCMD of natural gas, with a provision for expansion up to 10 MMTPA.

Natural gas from this terminal is being distributed to consumers through a pipeline from Dahej to Vijaipur. The Dahej site is ideally located to satisfy the enormous demand of power, fertiliser and other users located in the industrial belt between Vadodara and Surat.