Dalal Street

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.