Kalpataru Power, Zee Entertainment, reports by Kotak Sec PDF links

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http://www.kotaksecurities.com/pdf/dmb/MorningInsight23052012.pdf



KALPATARU POWER TRANSMISSION LTD (KPTL)
PRICE: RS.81 RECOMMENDATION: ACCUMULATE
TARGET PRICE: RS.91 FY13E P/E: 6.9X
 KPTL reported Q4FY12 numbers in line with our estimates on revenue
and profitability front. Slower execution in domestic T&D projects has
led to YoY decline in FY12 reported PAT.
 Stock has been underperforming the broader market through past two
quarters. Muted order book growth and company's fund raising in last
fiscal that has met with skepticism are the primary reasons for this.
 We reduce our earnings estimate for FY13 to factor in 1) increasing competition
in domestic market leading to pricing pressure 2) increase in raw
material prices 3) continuing wage inflation.
 We maintain our recommendation to 'Accumulate' with a one year DCF
based target price of Rs.91 (Rs 130 earlier).



ZEE ENTERTAINMENT
PRICE: RS.124 RECOMMENDATION: ACCUMULATE
TARGET PRICE: RS.132 FY13E P/E: 18.9X
 4QFY12 Results affected by accounting changes, FY12 results broadly in
line with estimates: Zee Entertainment 4QFY12 results are difficult to interpret
on account of strong impact of changes in accounting method.
The company reported PAT Rs 1601 mn, modestly ahead of our expectations.
Profit numbers for FY12 were broadly in line with our estimates.
 Raise earnings estimates on improved advertising and subscription revenue
growth outlook: We affect changes in EPS estimates in order to account
for stronger growth in advertising revenues (expectation of stronger
ratings in key channels in FY13) and domestic subscription revenues
(as proven by strong performance in FY12). We expect 12.4%/12.7% revenue
growth in FY13/ FY14, and 24.4%/ 25.6% EBITDA margin in the
same years. Our revised EPS for FY13 is 8% ahead of our prior estimates.
 Strengthening Position of Channels, Digitization poses challenges to our
prior view: One of the key reasons for our negative view on Zee Entertainment
has been the weakness in the company's channels, and our expectations
of flat earnings in FY12 (borne out by results). However, we
note that ZEEL channels have improved their performance over the past
two quarters, which is an upside risk to our view. The strength in ZEEL
channels have long-term implications, especially in the light of DAS,
which is to kick off in July, 2013. We believe the expectations from Zee
Entertainment's subscription revenues shall be altered meaningfully by
the strength in its channels' ratings. Long-term revenue growth as well
as margins may receive a significant boost.
 Current Environment favors Zee Entertainment, attractive in visibility
compared with other media plays: We believe that ZEEL is positioned favorably
in an environment, given high reliance on recession-proof subscription
revenues and improvement in ratings after weak FY12. While
we agree that valuations are stretched at CMP, we believe Zee Entertainment
is among the safer stocks to be invested in at present, given revenue
streams, and strong balance sheet. On account of higher long-term
projections of revenue growth and margin expansion, and strong visibility
in earnings of current operations, we raise our rating on Zee Entertainment
to ACCUMULATE (SELL earlier), with a price target of Rs 132.
 Risks to our investment view include loss of competitive position,
weaker growth in industry advertising growth, and investments that
may be made in the coming year in new initiatives by the company. We
have a few reservations, on account of which we believe the stock could
offer better entry opportunities. These include: 1/ possibility of heightened
competition in GEC space post IPL season, 2/ risks to earnings on
new investments, 3/ risks to cash flows on discretionary capex by the
management, which may not necessarily have/perceived to have commensurate
benefits to the media business.