Research Calls

Tata Motors: Neutral

Motilal Oswal Securities has maintained its 'neutral' call on Tata Motors, noting that the change in product mix, coupled with equity dilution post-Tata Finance merger, would restrict earnings growth in FY06-07.

The Indian freight market is rapidly re-aligning with the Hub & Spoke model; and this is expected to spur growth in LCVs. But M&HCVs would face cyclical pressure due to a drop in replacement demand.

Tata Motors, the market leader, is changing its mix to gear up for this. Tata Motors is gearing up for opportunities in the 30-tonne space and is also tapping the potential in the bus segment, which presents a lucrative export opportunity.

Motilal Oswal says over the longer term, earnings would rebound, driven by the revival in HCV demand, higher contributions from exports and subsidiaries. The firm expects Tata Motors to record a sales growth of 17 per cent and 12 per cent in FY06 and FY07. Net profit growth for the same periods is anticipated to be 14 per cent and 11 per cent respectively.

Zee Telefilms: Underperformer

SSKI Securities has rated Zee Telefilms as an 'underperformer' with a target price of Rs 165. Even as the company posted a 24.5 per cent adjusted revenue growth to Rs 347 crore in June 05 quarter, its operating profit grew by a mere 1.8 per cent to Rs 99.8 crore as margins shrunk by 641 basis points due to start-up losses of Rs 14.8 crore on Zee Smile, Zee Telugu and Zee Sports.

Nevertheless, the company's focus on improvement of content quality and revamped sales network has pushed advertising income by 16.7 per cent. Subscription revenues grew by 4 per cent q-o-q, partly on account of 75,000 additional international subscribers and aggressive promotional schemes in domestic market.

The report adds, "Since Zee is addressing the issues of content and sales, we believe that it will be in a better position to leverage its channel bouquet "� the largest among broadcasters." But the concern is the distribution opportunity for Zee given the recent go-ahead to Star-Tata alliance. The issue of content stability also remains unaddressed.

Asian Electronics: Strong Buy Prime Broking recommends a 'strong buy' on Asian Electronics at Rs 183. The reports points out that due to increasing awareness about energy efficiency and government initiatives, the company has a strong customer base of 500 institutional clients.

It manufacturers products with ESCO component required to conserve energy. The company has in place strategic alliances with Global Energy Management, Westinghouse and Asian Raymold Lighting.

The report adds that the company has huge export potential. Moreover, it has a sustained focus on new product development. The company board has approved the proposal of raising about Rs 130 crore by way of ECBs, FCCBs and preferential allotment.

The risks for the company include an unfavourable dollar-rupee move, rising prices of imported components and unorganised competition. The stock trades at 11.8x.