Satnam Overseas: Kohinoor lights up

ANALYSTS' CORNER

Four-S Research initiating coverage on branded rice major, Satnam Overseas, is bullish on the company's strong brand equity for its flagship brand Kohinoor. The company's ready-to-eat foods drive its topline and add to profitability.

Its global infrastructure, distribution network and long-term relationship with global food chains, are expected to push exports. The company has two subsidiaries in the US and UK, a rice polishing mill in the UK and a joint venture in UAE. It supplies to 57 countries through 45 distributors.

The company has state-of-the-art manufacturing infrastructure with automated facilities of 40 MTPH for basmati rice and 50,000 pouches per day for packaged food.

The report adds that the company has a derisked business model because it has well-diversified revenue streams from premium basmati rice, value basmati rice and ready-to-eat foods. No single customer of the company accounts for more than five per cent of the sales. The stock trades at a P/E of 10.23.

Balaji Telefilms: Glossy content

CLSA Research report states that Balaji Telefilms, a leading television content supplier, continues to be a beneficiary of improving advertising on television and increasing pressure on broadcasters to focus on quality content with the onset of addressability.

The company's programming continues to dominate in all the top 20 programmes in Hindi C&S channels. Balaji is replacing mature shows, exploring new formats and has made a successful foray into movies. New shows and entry into budget movies is leading its return to growth.

The company's realisations are improving and it is currently negotiating with Star for a rate increase. Star's most successful programs still come out of Balaji stable which remains the undisputed leader in Hindi television content.

The report expects the turnaround in Balaji's financial performance to continue. The company's strategy into movie making is an extension of its content business and also involves de-risking revenues and enhancing profits.

Pantaloon Retail: Overvalued

Citigroup Research maintains its sell recommendation on Pantaloon Retail. The report explains that the company's aggressive growth agenda and forays into new businesses are adding risks, while valuations still appear expensive.

Although Pantaloon is well positioned to gain from the success of modern retail formats in India, the report believes that the recent expansion of multiples is unsustainable, as it has been driven by strong monthly sales growth numbers, few options for investors in the sector and very strong liquidity in the Indian stock market.

The report adds, "We are reducing our EPS estimates, as we expect margins to peak in FY05E and because of anticipated higher finance costs. We have lowered our gross margin assumptions, due to the higher contribution from value retailing. However, based on a 30x one-year forward P/E, our target price rises from Rs 692 to Rs 1,060. Its recent acquisitions, Galaxy and Planted Sports, are unlikely to be scaled up, while the company has aggressive plans to enter the home solutions segment."