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Hold Tata Teleservices Maharashtra; Target :Rs 15 :: ICICI Securities (pdf link)

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S u b s c r i b e r   b a s e   r e d u c e s ;   a   m a j o r   c o n c e r n…
Tata Teleservices Maharashtra’s (TTML) consolidated numbers for
Q3FY12 were in line with our expectations on the topline front but
disappointed on the bottom line front. The topline stood at | 630.6 crore
against our estimate of | 626.6 crore, growing 9.2% YoY and 2.3% QoQ.
EBITDA for the quarter stood at | 132.9 crore against our estimate of
| 147.2 crore, de growing 4.9% QoQ on the back of | 13.3 crore of
provisions provided for contingencies against the companies primarily
related to DoT. The EBITDA margin stood at 21.1%, falling 160 bps QoQ.
The company reported a loss of | 144.6 crore against our estimate of
| 98.4 crore primarily on account of higher than expected interest cost,
which included a forex loss of | 11.2 crore.

Highlights of the quarter
While revenues grew 2.3% QoQ, the wireless subscriber base fell
drastically from 16.8 million in Q2FY12 to 14.8 million in Q3FY12
representing a fall of 12.2%. The wireline subscriber base, however, grew
by 1.7% to 0.8 million. The EBITDA margin contracted 160 bps QoQ to
21.1%, primarily due | 13.3 crore of provisions for contingencies against
the company by DoT. However, a sliver lining for Q3FY12 was the share
of VAS at 32% based on higher usage of Tata Photon.
V a l u a t i o n
A decline in the subscriber base in this quarter is a major concern. We
expect the topline to grow at 3.9% CAGR over FY11-13E. However, the
net loss is expected to increase to | 454.2 crore by FY13 from positive
PAT of | 80.2 crore in FY11 (on account of sale of the tower company for
| 865.4 crore). Valuing the company at a 35% discount to Airtel at 1.2x
FY13E sales, we have arrived at a target price of | 15. At the CMP of | 16,
the stock is trading at 1.2x FY13E sales. Our target price of | 15 implies a
downside of 5%. We have downgraded the stock from BUY to HOLD.

Hold Tata Teleservices Maharashtra; Target : Rs 16 ::ICICI Securities

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B e t t e r   t h a n   e x p e c t e d   o p e r a t i o n a  l l y…
Tata Teleservices Maharashtra’s (TTML) consolidated numbers for
Q2FY12 were slightly better than our  expectations on the topline front.
The topline stood at | 616.4 crore vs. our estimate of | 596.0 crore,
growing 7.0% YoY and 4.5% QoQ. The EBITDA for the quarter stood at |
139.8 crore vs. our estimate of | 124.1, growing 17.1% QoQ. The EBITDA
margin stood at 22.7%, an improvement of 244 bps QoQ. The company
reported a loss of | 130.2 crore vs. our estimation of | 122.4 crore
primarily on account of higher-than-expected interest cost.

Highlights of the quarter
While revenues grew 4.5% QoQ, the wireless subscriber base stayed
more or less flat at 16.8 million. The wireline subscriber base grew by a
marginal 1.0% to 0.8 million. The EBITDA margin for the company
improved by 244 bps QoQ to 22.7% primarily due to lower marketing and
promotion expenses, which reduced from | 66.6 crore, at 11.3% of
revenues in Q1FY12 to | 61.2 crore, at 9.9% of revenues in Q2FY12. The
PAT margin, however, declined from a negative 20.2% to a negative
21.1% in Q2FY12 primarily due to higher interest cost.
V a l u a t i o n
We estimate the topline will grow at 4.8% CAGR over FY11-13E.
However, the net loss is expected to increase to | 414.3 crore by FY13
from positive PAT of | 80.2 crore in FY11 (on account of the sale of the
tower company for | 865.4 crore).  Valuing the company at a 35%
discount  to Airtel at 1.2x FY13E  sales, we have arrived at a  target price of
| 16. At the CMP of | 15, the stock is trading at 1.1x FY13E sales. Our
target price of | 16 implies an upside of 9%. We rate the stock as HOLD

Sell Tata Teleservices Mah' Target : Rs 19:: ICICI Securities

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D i s m a l   p e r f o r m a n c e ,   o u t l o o k   b l e a k …
Tata Teleservices Maharashtra’s (TTML) consolidated numbers for
Q1FY12 were slightly better than our expectations. The topline stood at |
590.0 crore against our estimate of | 565.4 crore, growing 5.3% YoY and
remaining more or less flat QoQ. EBITDA for the quarter stood at | 119.4
crore against our estimate of | 107.3 crore, growing 7.3% QoQ. EBITDA
margin stood at 20.2% representing an improvement of 135 bps QoQ.
The company reported a loss of | 119.3 crore against our estimation of |
166.3 crore primarily on account of lower than expected depreciation.
ƒ Highlights of the quarter
TTML reported ARPU of | 184 (based on active subscriber base) for
Q1FY12, growing 2.8% QoQ on active subscriber base. According to
our estimates, active subscribers as a percentage of total
subscribers improved marginally from ~45% in Q4FY11 to ~46% in
Q1FY12. The company managed to improve its MoU from 407 to
416 while the ARPM remained flat at 44 paisa. With increasing usage
of Tata Photon services, non-voice revenues increased to 29.8%
from 26.7% in last quarter. The company also recorded lowest
quarterly addition in the wireless segment in the last eight quarters.
V a l u a t i o n
We estimate the topline will grow at 7.8% CAGR over FY11-13E.
However, net loss is expected to increase to | 482.0 crore by FY13 from
positive PAT of | 80.2 crore in FY11 (on account of sale of the tower
company for | 865.4 crore). Valuing the company at a 35% discount to
Airtel at 1.4x FY13E sales, we have arrived at a target price of | 19. At the
CMP of | 21, the stock is trading at 1.5x FY13E sales. Our target price of |
19 implies a downside of 10%. We continue to rate the stock as SELL.

Tata Teleservices (TTLS IN) UW: Tariff hikes confirmed, challenges remain  HSBC Research

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Tata Teleservices (TTLS IN)
UW: Tariff hikes confirmed, challenges remain
 TTML confirms increases in tariffs but adopts a gradual
approach
 VAS as a percentage of revenues at 29.8% (up 11.3% y-o-y),
data cards growth support CDMA  
 Maintain Underweight (remove the V Flag) and raise target
price to INR18 (from INR15)


1QFY12 results were mixed, management confirmed tariff hikes: Revenues in the quarter
were flat; EBITDA was down 9.5% and net loss for the quarter at INR1.2bn, was 26% higher
than our estimates. However, the highlight of the results was confirmation from Tata
Teleservices (TTML) that it has raised SMS tariffs from July by c67%, while post-one-year
STD voice tariffs will rise from 1p/second to 2p/second. Furthermore management suggested
that it had tweaked some of the existing products in a manner that would result in better voice
realisation. TTML views the tariff hike as sustainable and suggested that availability of
incremental GSM spectrum will reduce its capex but not necessarily have any impact on the
new tariffs. We view the tariff hikes by TTML as positive for the sector and believe that its
participation in the tariff hikes, even though not with similar vigour, supports our view that the
recent tariff hikes by Idea (IDEA IN, INR94.8, N),  Bharti (BHARTI IN, INR432, OW) and
Vodafone India (Not listed) are sustainable.
Operating parameters during the quarter were strong: ARPU increased 2.8% to INR184,
while MoU’s increased by 2.2% to 416 minutes for the quarter. The key positive was a 0.6%
increase in RPM to 44.2 paisa from 43.9 paisa in the previous quarter. VAS as a % of revenues
for TTML increased to 29.8% compared to 18.5% in the same quarter last year (see figure 3).
A key concern for the company is the high percentage of inactive subscriber base; as per the
TRAI, c55% of TTML’s subscribers are inactive.
Valuation and rating: We retain our Underweight rating (remove the volatility flag) but raise
our 12-month target price to INR 18 (from INR15), which reflects our higher estimates
following the tariff hikes by the company. We raise our FY13 estimates for profit-after-tax by
17% and EBITDA by 8%. Our UW rating reflects TTML’s late entry in GSM, poor subscriber
quality, significant capex requirements in GSM given limited spectrum of c4.4MHz and lack
of 3G spectrum in Mumbai. Upside risks include the ability to churn high-end subscribers from
GSM incumbents and receipt of additional spectrum on GSM.

KIFS Result update of: BHEL and TTML

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KIFS Result update of:

BHEL

OVERVIEW

BHEL has diversified its product base over the years and today caters to the needs of almost all the key sectors of the economy. In addition to the power generation equipment , BHEL products cater to a wide spectrum of customers encompassing various fields of operation, like Fertilisers & Petrochemicals, Refineries, Oil Exploration and production, steel and metals etc. BHEL has order book of 65,000 MW of BTG equipment at the end of FY11, giving it a visibility for next 3-4 years. Further, by FY14-FY15 ordering for 13th plan will start, where the opportunity is expected to the tune of 1.5 lakh MW. Company has guided for the order inflows of Rs. 66,550 crore in FY12, about 16-17 GW of BTG orders.

Key highlights:

· Total income  grew by 14% Y-o-Y to Rs. 7540 cr. v/s Rs. 6601 cr in June-10

· Operating Profit grew by 35% Y-o-Y to Rs. 1528 cr.  v/s Rs. 1128 cr in June-10

· OPM grew by 386 bps Y-o-Y to 20.3%  v/s 16.4% in June-10

· Net profit grew by 22% Y-o-Y to Rs. 816 cr.  v/s Rs. 668 cr in June-10

· NPM grew by 112 bps Y-o-Y to 10.8%  v/s 9.7% in June-10.

TTML

OVERVIEW

TTML provides a range of telephony services such as mobile, fixed wireless phones (FWP), public telephone booths & wireline services. Its suite of broadband data network and application services include leased lines, DSL, Wi-Fi, Ethernet, Managed Gateway services & Web Conferencing services. The company has opened True Value Shops, its franchisee models, which gives a platform to display its products and services. It has also launched USB plug-to-surf modems catering to laptop and desktop users.

Key highlights:

· Total income  grew by 5% Y-o-Y to Rs. 590 cr. v/s Rs. 560 cr in June-10

· Operating Profit fell by 85% Y-o-Y to Rs. 121 cr.  v/s Rs. 788 cr in June-10

· OPM fell by 12024 bps Y-o-Y to 20.5%  v/s 140.7% in June-10

· Net profit fell by 121% Y-o-Y to Rs. –119 cr.  v/s Rs. 558 cr in June-10

· NPM fell by 11984 bps Y-o-Y to –20.2% v/s 99.6% in June-10

Thanks and Regards,

KIFS Research

Smartprofit: NHPC, REC, Tata Communications, Tata Teleservices Overview

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NATIONAL HYDRO POWER CORPORATION
CMP: 25
Target: 40 in 6 months
National Hydro Power Corporation, an entity of Government of India, is
country’s largest hydro power producer.
NHPC is currently having an installed capacity of more than 5,300 MW
and has a cash surplus of over Rs 4,000 crore.
It raked in a profit of Rs 2,166.67 crore in FY 2011
The state-run major is engaged in the construction of 10 projects at
various locations in the country,   going to have an additional
capacity of 4,502 MW.
It plans to increase the capacity to over 10,000 MW by end of 2012.
The coal price is expected to rise by 2012, which will result in
increase in power price by 20%. This will further boost the profit
margin of NHPC to a large extent.
Spanning on Government’s increasing emphasis on hydro power and NHPC’s
strong hold, we recommend a BUY on NHPC at CMP 25 to target 40 in 6
months, 75 in 18 months.


TATA TELESERVICES LTD
CMP: 21
Target: 30 in 3 months

Tata Teleservices Limited spearheads the Tata Group's presence in the
telecom sector. The Tata Group includes over 90 companies, over
395,000 employees worldwide and more than 3.5 million shareholders.
It launched mobile operations in January 2005 under the brand name
Tata Indicom and today enjoys a pan-India presence through existing
operations in all of India's 22 telecom Circles.

Tata Teleservices Limited also has a significant presence in the GSM
space, through its joint venture with NTT DOCOMO of Japan, and offers
differentiated products and services under the Tata DOCOMO brand name.

Today, Tata Teleservices Ltd, along with Tata Teleservices
(Maharashtra) Ltd, serves over 85 million customers in more than
450,000 towns and villages across the country.

Tata Teleservices saw a whooping rise in its sale rising by 39% to Rs.
3128.24 cr in FY 11.
The company, by improving its revenue model and deeper market
penetration, turned into a profit making one, by giving Net profit of
Rs 49.90 crore in FY11 vs net loss Rs 298 crore in FY10.
A per the latest news by telecom tribunal TDSAT, Tata Teleservices is
entitled 2G GSM spectrum in Delhi on priority basis compare to its
peers Idea, Unitech and Videocon.

Going forward we expect the company to maintain quarterly addition of
0.5 million subscriber in FY12, which signifies an addition of 20
million subscribers in a year.
We expect the upgrade to 3G to boost average revenue per user, premium
services may take time to pick up in a price sensitive market such as
India. Increase usage of broadband service on photon device driving
key metrics upwards. The overall performance of the company looks
encouraging.
We estimate the top line to grow at 6.1 % CAGR over FY11-13E. At CMP
of 21 we have a BUY rating on the stock with the target price of 30.

TATA COMMUNICATION
CMP: 217
Target: 250 in 4 months
Tata Communications Limited along with its global subsidiaries (Tata
Communications) is a leading global provider of the new world of
communications managed network connectivity, hosted data center,
communications solutions and business transformation services to
global and Indian enterprises & service providers as well as,
broadband and content services to Indian consumers. The Tata Global
Network encompasses one of the most advanced and largest submarine
cable networks, a Tier-1 IP network, connectivity to more than 200
countries across 400 PoPs and more than one million square feet data
center space.  Tata Communications serves its customers from its
offices in 80 cities in 40 countries worldwide. It has strategic
investments in operators in South Africa (Neotel), Sri Lanka (Tata
Communications Lanka Limited) and Nepal (United Telecom Limited). The
number one global international wholesale voice operator and number
one provider of International Long Distance, Enterprise Data and
Internet Services in India, the company was named "Best Wholesale
Carrier" at the World Communications Awards and was named the "Best
Pan-Asian Wholesale Provider".

Tata Communications consolidated results for the year ended on March
31, 2011. Consolidated revenues increased by 8% to Rs 11,932 crores
(about USD 2.6 billion) from Rs.11,026crores (about USD 2.3 billion)
in the previous year. The company’s operating profit (EBITDA) was up
21% at Rs 1,226 crores for 2010-11 as against Rs 1,012 crores for the
previous year.

Tcom has made conscious efforts to diversify from its core wholesale
voice business and tap the higher margin managed services and cloud
business. The company also announced the international launch of
InstaCompute, its cloud infrastructure and application services
offering. Tata Communications signed a significant international voice
sourcing agreement with Videotron, one of Canada’s largest
communications companies.

With Internet users increasing by more than 500% all across the globe
and Tata Comm being the global leader in providing internet
facilities, we see tremendous demand and growth for Tata in near
future.

Tata Communication got approval from Supreme Court for sale of a part
of 774 acres of land in Maharashtra which belonged to VSNL (Tata
Communication). This will be accounted in the sheets of Tata
Communication.

We believe the stock is a good opportunity point as long term drivers
are intact asaddressable market opportunity leaves tremendous scope
for expansion stock may go up by 40%.

The company's trailing 12-month (TTM) EPS was at Rs 5.62 per share.
(Mar, 2011). The stock's price-to-earnings (P/E) ratio was 37.71. The
latest book value of the company is Rs 261.09 per share.

However, we expect impact on revenues and EBIDTA our FY12/13 estimates
9.2 % of upside.
We recommend ‘BUY’ on the stock at CMP 217 with a target price of Rs…
250 ...

BUY RURAL ELECTRIFICATION CORPORATION LIMITED (REC)
CMP: 216; Target: 300
Rural Electrification Corporation Limited (REC), under Ministry of
Power, was incorporated on July 25, 1969 under the Companies Act 1956.
REC a listed Public Sector Enterprise Government of India with a net
worth of Rs. 11,080 Crore as on 31.03.10.
REC provides loan assistance to SEBs/State Power Utilities for
investments in rural electrification schemes through its Corporate
Office located at New Delhi and 17 field units (Project Offices),
which are located in most of the States.
Rural Electrification Corporation (REC)'s net profit rose 28.4% to Rs
2569.92 crore on 26.7% increase in total income to Rs 8495.26 crore in
the year ended March 2011 over the year ended March 2010.
Following the rumors that media has spread about REC, its Finance
Director HD Khunteta have cleared up Tamil Nadu issue's rumors in the
following interview to CNBC. Tamil Nadu electricity board is a
Government entity and the Government will take the responsibility to
pay REC the due amount if the board fails. In no ways will the Tamil
Nadu board be defaulted by REC. REC is receiving regular interest on
due date by the board.
For 2011-12, we expect REC’s loan growth to stabilise around 25 per
cent, led by slowing disbursements and higher competition. Its
disbursements are estimated to grow by 20 per cent, with some cushion
from undisbursed loans of over Rs 100,000 crore.
We have a ‘BUY’ rating on the stock at CMP of 216 due to REC’s robust
long-term business outlook and valuations. Also to post compounded
earnings growth of 25 per cent and average return on equity (RoE) of
22 per cent over 2011-12.

Arpu boost from 3G Tata Teleservices Maharashtra (TTML)::CLSA

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Arpu boost from 3G

Tata Teleservices Maharashtra (TTML), the first to launch 3G in

Maharashtra (excluding Mumbai) across 16 cities, had encouraging

mobile trends. Led by 3G, TTML saw value added services and data

revenue grow 3ppt to 27% of Arpu, which in turn along with higher

usage increased Arpu 5%QoQ. Although not strictly comparable due

to TTML’s dual networks and limited operations, Bharti Airtel too will

likely report similar trends as 3G gathers momentum. Bharti remains

our top sector pick and we maintain our Outperform call on its stock.

Tata Teleservices (Maharashtra) Aggressive cost-control offsets revenue miss in 3QFY11 : Anand Rathi

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Tata Teleservices (Maharashtra)
Aggressive cost-control offsets revenue miss in 3QFY11
TTML’s 3Q revenue belied our estimate by 4%. EBITDA, however,
was ~9% higher, following the aggressive reduction in sales and
marketing expenses. Contrary to our expectations, TTML has not
yet started charging amortization of 3G spectrum fee and interest
on 3G loans to the P&L. As a result, net loss fell qoq to `796m as
against our estimate of qoq increase to `1.3bn.

Anand Rathi: Tata Teleservices (Maharashtra) Aggressive cost-control offsets revenue miss in 3QFY11

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Tata Teleservices (Maharashtra)
Aggressive cost-control offsets revenue miss in 3QFY11
TTML’s 3Q revenue belied our estimate by 4%. EBITDA, however,
was ~9% higher, following the aggressive reduction in sales and
marketing expenses. Contrary to our expectations, TTML has not
yet started charging amortization of 3G spectrum fee and interest
on 3G loans to the P&L. As a result, net loss fell qoq to `796m as
against our estimate of qoq increase to `1.3bn.

Better than expectation but still poor… Tata Teleservices Maharashtra:: ICICI Sec

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Better than expectation but still poor…
Tata Teleservices Maharashtra (TTML) reported its Q2FY11 results,
which were slightly higher than our expectation. It reported a topline of
Rs 576.3 crore against our expectation of Rs 565.0 crore. The topline
grew 2.9% and 6.2% QoQ and YoY, respectively. The core income
remained flat QoQ at Rs 557.7 crore. The EBITDA margin declined 159
bps YoY and 104 bps QoQ to 19.5%. The decline was due to higher
network operating cost. It increased by 33.3% YoY and 11.0% QoQ. Net
loss for the quarter was Rs 97.9 crore against our expectation of Rs
161.1, aided by lower interest and depreciation cost. PAT cannot be
compared QoQ as Q1FY11 included income from sale of assets of Rs
834.9 crore.
􀂃 Highlights of the quarter
During the quarter, TTML added 1.1 million subscribers, growing
8.4% QoQ. ARPU for the quarter stood at Rs 170, marginally up by
3.7% QoQ from Rs 164, higher than our estimate of Rs 157. The
MoU improved by 4.9% QoQ to 403 minutes resulting in a 2.3%
decline in ARPM from Rs 0.43 in Q1FY11 to Rs 0.42 in Q1FY11.
However, the share of VAS was up from 19.0% in Q1FY11 and
14.0% in Q2FY10 to 22.0%. The increase in ARPU and increasing
share of VAS was on account of higher sales and usage of
broadband on Photon+ devices. On the wireline segment, the
company added 190 new subscribers in Q2FY11.
Valuation
The overall telecom industry is going through an unprecedented phase of
hyper intensive competition. This has resulted in a sharp fall in operating
metrics and slowdown of revenue growth and declining profitability.
Valuing the stock at 1.4x FY12E sales of Rs 2515 crore, we have arrived at
a target market capitalisation of Rs 3609 crore, implying per share value
of Rs 19. At Rs 23, the stock is trading at 1.8x FY12E sales. Our target
price implies a downside potential of 17%. We rate TTML as SELL.