Analysts' corner: Tata Motors

ABN Amro Research recommends a 'buy' on Tata Motors. The report states that the sharp uptrend in freight rates and the recent ban on overloading of trucks extend the turnaround in commercial vehicles' fortune, leading to upgrades in sales volume estimates.

Tata Motors, the biggest player in the domestic CV industry, is already enjoying gains with 13 per cent growth in domestic M&HCV sales in January versus a decline of 1.8 per cent in Q3FY06.

With continued buoyancy in industrial production, the report is bullish on the truck industry and upgrades growth forecast in respect of Tata Motors for FY07 domestic M&HCV sales volume from 7 per cent to 12 per cent.

However, the FY08 growth forecast is maintained at 7 per cent. ABN Amro Research also marginally upgraded the volume outlook for LCVs and cars, backed by the auto player's impressive December 2005 and January 2006 sales.

Jet Airways

SSKI, in its results note, rates Jet Airways an 'underperformer'. The report states that the company's weak Q3FY06 numbers vindicate the stand that rapid capacity addition in the domestic sector will take its toll on the market leader.

Despite offering 50 per cent of seats on discount (40 per cent in Q2FY06), Jet managed to post only 4 per cent y-o-y rise in passenger traffic in Q3FY06.

This also highlights the extent of competitive intensity in the sector. Jet reported a net profit of Rs 61 crore "" down by 53 per cent "" which is much lower than expectations.

The decline is largely due to start-up costs associated with new international routes, which hammered EBITDA margin.

The airline reported 22 per cent increase in revenues, largely driven by international business. Apart from protecting its turf, Jet now has the additional burden of turning around Sahara's loss-making operations.

Union Bank of India

IL&FS Investsmart, in its results update on Union Bank of India, recommends a 'buy'. The report states that the bank posted a rise in both topline and bottomline on the back of handsome growth in business.

It has grown much faster than the industry's pace with growth in advances of 35 per cent and in deposits of 26 per cent at the end of December 2005.

As more securities were transferred to HTM this year, the bank has over 70 per cent of its investments in HTM, giving it a relatively higher cushion against rising interest rates.

Though such impressive growth may not continue, the bank is still expected to grow at a faster clip than peers of the same size. With 75 per cent of business captured under the CBS network, the bank is well ahead of peers in terms of technology implementation.