NDTV: Prime pick

It's been a good show from the broadcaster with revenues growing at a brisk pace and the entertainment channel notching up high TRPs.

The Rs 370 crore NDTV may have posted an operating loss of Rs 140 crore during FY08 but the broadcaster has done well to post a revenue growth of 32 per cent growth during the year.

With the recently launched Imagine and Lifestyle channels both contributing to the top line, the March 2008 quarter revenues have grown 50 per cent, though the start-up costs have resulted in a net loss of Rs 114 crore.

While the core news operations have done well, ratings for programmes on Imagine have been fairly good and the broadcaster is on its way to reaching the third spot in the general entertainment space, currently occupied by Sony.

That, say analysts may well fetch it advertising revenues of over Rs 200 crore in the first year of operation.

However, in the long run subscription revenues will drive the top line as more players compete for the advertising pie.

The balance sheet will continue to be under pressure for some time till the new channels turn profitable. Over the past year NDTV has added five broadcast properties and plans to launch more lifestyle and a film channel.

Besides, it is looking to separate the news business from other genres with a view to unlocking value and also possibly roping in strategic investors. The broadcaster has already roped in the GE-owned NBC Universal which acquired a stake in a subsidiary of NDTV.

It is also possible that the broadcaster spins off its business news channel into anew entity again with the intention of striking an alliance with a foreign media player.

NDTV has been steadily de-risking its business model and apart from having a presence across different genres, which will help it attract advertising, is also focussing on media software , global consulting and process outsourcing.

The stock has done fairly well and at Rs 413 should be an outperformer given the strong brand equity and track record that the broadcaster enjoys.

Petronet: Cashing in on demand

If BHEL and NTPC disappointed the street with their March 2008 quarter numbers, Petronet LNG has done somewhat better than expectations.

For instance, not only did the company sell higher volumes of liquefied natural gas ( LNG), in the March quarter, it did so at better prices.

The Rs 6,555 crore company imports LNG, both through contracts and on a spot basis, which it supplies to users like the fertiliser industry.

It hasn't been too difficult for Petronet to achieve better sales because the demand for natural gas in the country is rising; moreover globally prices have remained high so realisations were higher by about 5 per cent.

Thus, net sales are up a decent 14 per cent at Rs 1,753 crore. However, the company's operating profit margin fell 65 basis points y-o-y to 12.25 per cent in Q4 FY08 mainly because other expenditure was higher, though for FY08 as a whole the margin was up 140 basis points at 13.2 per cent.

Petronet has been doing brisk business in a time when there is a shortage of natural gas in the country. However, from FY09 onwards, producers like ONGC are expected to pump in greater supplies into the market and that could put Petronet in a bit of a spot.

In short, realisations could come off. Investors aren't too worried yet; the stock has done well to gain 3.2 per cent on Thursday closing at Rs 79. It's been a relative underperformer in 2008 so far, losing 28 per cent.

It's unlikely the stock which trades at 15 times estimated FY 09 earnings will do too much.