Zee News
Recommendation: Buy
CMP = Rs 60 (as of Monday)
CMP = Rs 60 (as of Monday)
Price target: Rs 73
Result highlights:
- Zee News Ltd's (ZNL) Q2FY2008 results are in line with our expectations. The revenue from operations grew by a robust 46.2% year on year (yoy) to Rs 79.8 crore while the net profit zoomed by 154% to Rs 5.6 crore during the quarter.
- The advertising revenues soared by 57% yoy to Rs 60.8 crore but the growth in the subscription revenues was a moderate 9.5% to Rs15 crore. A break-up of its channels into the existing and new businesses shows that revenues from the existing businesses grew by a handsome 42% yoy whereas the new businesses recorded an 80% growth in their revenues.
- The operating profit margin (OPM) for the quarter stood at 13.3% against a dismal 1.5% for Q2FY2007. Thus the operating profit grew to Rs 10.6 crore against Rs0.8 crore in Q2FY2007. The existing businesses continued to maintain a good margin, which stood at 33% for the quarter. The operating loss of the new businesses was almost constant yoy at Rs 13.1 crore.
- While Zee Marathi and Zee Bangla improved their leadership position during the quarter, the new channels, Zee Telugu, Zee Kannada and Zee 24 Ghanta, achieved commendable improvement in their Gross Rating Points (GRPs) yoy.
- At the current market price of Rs 60.3 the stock trades at 28.8x its FY2009E earnings per share (EPS) of Rs 2.1 and at FY2009E market cap/sales of 3.3x.
- I maintain Buy recommendation on the stock with price target of Rs 73 with a time frame of 8-12 months.
Apollo Tyres
Recommendation: Buy
CMP = Rs 40
CMP = Rs 40
Price target: Rs 52
Result highlights:
- Apollo Tyres has rendered a brilliant performance for Q2FY2008 on the back of a strong topline growth. The quarterly performance has been further fuelled by an improvement in the operating profit margin (OPM) due to lower raw material prices.
- The topline has grown by 10% to Rs 844.3 crore for the quarter, which has been led mainly by a volume growth of 9% and a realisation growth of 1%. The slowdown has continued in the original equipment (OE) business, whereas the replacement market has grown by a high single digit.
- The OPM has improved substantially to 12.8% as against 7.8% last year on the back of softer raw material prices, improvement in price realisation, and increasing operating efficiencies. Consequently, the operating profit marked a growth of 81% to Rs 108.1 crore. A higher other income has enabled the net profit for the quarter to grow by 164.2% to Rs 51.1 crore.
- On the consolidated basis, the net revenues have been flat at Rs 1,085 crore, while the profit has improved to Rs 57.6 crore (up 216% year on year [yoy]). The sales of its subsidiary Dunlop has been affected during the quarter due to a shutdown in September 2007, however the profitability has improved.
- Dunlop is performing very well and the earnings before interest, depreciation, tax, and amortisation (EBIDTA) margin has reached the 12% level during the quarter.
- At the current market price of Rs 40, the stock discounts its FY2009E consolidated earnings by 7.6x and quotes at an enterprise value (EV)/EBIDTA of 4.9x.
- I maintain Buy recommendation on the stock with a revised price target of Rs 52.
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