Year: 2007

Citigroup Research downgraded the price target of Tata Tea Ltd after a disappointing quarter. Consolidated EBITDA margins declined by 340bps due to high advertising and promotional expenses. Tata Tea’s consolidated revenues grew by 28% driven primarily by its Eight O’ Clock acquisition and strong branded sales in its domestic business, which grew 18%. Profitability was, however, hit due to a higher tax rate and higher interest charges. Net profit declined 3.5% to Rs44.5m

Cutting FY08E and FY09E earnings estimates by 15.5% and 3.5% to reflect lower than expected 1QFY08 results. Citi reduced EBITDA margin assumptions building in higher ad-spend for Tetley. Consequently, to reflect lower earnings, Citi has cut target price to Rs1045 (Rs1150 earlier) retaining our target P/E multiple of 15x mid-FY09E earnings .

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Power Finance Corporation’s [PFC] first quarter results look terrific at a glance but when you look at the finer details you will see that other income contributed to a large portion of the bottom line.

Kotak Securities has an Underperformer rating on the stock with a price target of Rs 125. CMP of PFC is Rs 195.

PFC has reported stable spread of 1.9% in 1Q08 and 4Q07. PFC’s ALM position seems comfortable in the near term. riable rate loans (with three-year reset) from FY2005 will be re-priced about 2-3% higher in FY2008; About 61% of PFC’s assets are floating as compared to 16% of its liabilities. This will help the company in a rising interest rate scenario.

PFC’s tax rate in 1Q07 was higher at 41% on account of prior period income tax demand. Consequently, reported PAT was subdued in that period. The 1Q08 effective tax rate was 32% in line with long-term trends.

PFC is expected to report an EPS of Rs 11.2 for FY2008 and Rs 12.8 for FY2009. Dalal Street Analyst advises Investors to Book Profits at CMP of Rs 198 as the stock looks expensive.

Citigroup just a while ago upgraded Corporation Bank to a BUY and also revised its target price upwards to Rs 455 from Rs 379. The reason for the upgrade is the solid performance in Q1-08; profits are up 23% – well ahead of 3% growth expectations. Balance-sheet driven NII expansion, fee growth and reduced bond portfolio charges (sharp base effect) drive profits up 23%.

Management foresees about 20% growth, which should alleviate recent funding pressures and support its above-industry capital cushion. Corp Bank is expected to report a fully diluted EPS of Rs 45.53 and Rs 55.44 for FY2008 and FY2009 respectively.

EVA-based target price of Rs455 is premised on a risk free rate of 8%, industry average margins of 230bps and higher than industry long-term capital ratio of 6.5% vs 6% average. Citi is also benchmarking target price on a 1.3x FY09E P/BV multiple (FY08E earlier), which is in-line with industry average target multiple.