Stock Views on TVS MOTORS, JINDAL STEEL & POWER, BHARTI AIRTEL

HSBC on BHARTI AIRTEL

HSBC maintains `Sell' rating on Bharti Airtel (Bharti). Bharti's Zain deal in Africa is expected to be earnings dilutive in the near term (dilution estimated at 14% for FY11 and 10% for FY12). The challenges before it include tariff cuts and elasticity, high taxes and the need for a generalised approach when it will be important to provide a local flavour in each market. News reports mentioning Bharti's plans to join hands with other tier-2 telecom operators in Africa to share radio access networks can be a positive, as it will enable the company to expand network rapidly with minimum capex and operating expenditure. However, due to lack of details on this matter, HSBC is not changing its forecasts. On the other hand, network sharing is considered a double-edged sword as operator loses independence. HSBC's cautious view on Bharti is driven by weak earnings growth and the hurdles it will likely face in replicating the minute factory model at Zain.

MORGAN STANLEY  on JINDAL STEEL & POWER


Morgan Stanley upped its target price to Rs 666 but maintained its 'Hold' rating on Jindal Steel & Power (JSPL). Although JSPL's growth trajectory is steepening for both its power and steel businesses, its array of projects remain high-return Morgan Stanley doesn't find much upside from the current levels. According to MS, the company is among the best-positioned steel companies with 100% self-sufficiency in iron ore and growing proportion of value-added products. Steel business EBIDTA is expected to grow at a CAGR of 31% with volume CAGR of 16% over 2010-2013E. The EBIDTA growth estimates for next two years have been upped following a higher forecast for steel prices, jump in JSPL's pellet production from Orissa plant, commissioning of Jharkhand steel project and a 1350-MW power plant.

MORGAN STANLEY  on TVS MOTORS

Morgan Stanley assumed coverage on TVS Motors with `Equal-weight' rating as the recent run-up in the stock has priced in much of the upside from demand recovery. TVS was a strong outperformer in FY10, as margins have expanded through overall volume recovery and the benefits of operating leverage. On the back of its new launches of Jive and Wego in FY11, MS projects strong 23% CAGR EBITDA growth from FY10 to FY12. However, the company's performance will depend on the success of new launches amid competition and input costs. While the new launches are expected to grow its domestic volumes by 18% in FY11E, it is expected to disclose around Rs 50 crore loss towards its operations in Indonesia for FY10. MS estimates the company to ramp up margins to 7.1% in FY11 via higher operating leverage.