Stock Views on DB REALTY, JSW ENERGY, TATA CHEMICALS

BANK OF AMERICA on TATA CHEMICALS


Bank of America reiterates the `Underperform' rating on Tata Chemicals. Tata Chemicals reported a disappointing quarter, with a 25% y-oy decline in recurring PAT. While revenue was up 33% y-o-y, it was led by a jump in trading of fertilisers and as Rallis was consolidated. While Bank of America tweaks estimates marginally, they remain about 14% below consensus. Domestic soda ash posted a weak quarter due to rising raw material prices and flooding of plant in rainy season. Profits in soda ash subsidiaries GCIP and BMGL declined 22% y-o-y as Tata Chemicals targetted market share gain in response to competition from Chinese producers. Bank of America expects soda ash to remain a drag going ahead, given global overcapacity, and price increases, if any, will likely be driven by rising transportation costs. The stock trades at 12x FY12E PE for about 14% EPS CAGR. New businesses, like marketing pulses, bananas and water purifiers, while making a positive contribution, will have a limited impact on earnings. Given low return ratios and a pressured margin outlook, the risk/reward remains unfavourable.

CITIGROUP on JSW ENERGY

Citigroup maintains `Hold' rating on JSW Energy. JSWEL's Q2FY11 PAT at 185 crore was 19% below estimates due to lower than expected ASP (average selling price), lower generation, and higher fuel costs. Fuel costs at 2.6/kWh were 11% higher than CIRA estimate of 2.35/kwh. Q2FY11 PAT included 37 crore profit from project management services provided to JSW Steel. JSWEL expects to book project management revenues form JSWSL for a few more quarters. Vijaynagar (860 MW) operated at 91% PLF due to maintenance shutdown. RWPL (135MW) was shutdown for about two months due to problems in refractory lining of the boiler. The unit is operating at 100% PLF now. JSWEL now expects to commission all units of RWPL by July 2011 due to difficult site conditions. The total project capex has been increased to 6,085 crore due to delays in execution that resulted in higher cost. JSWEL has strong execution track record and execution of most of the projects remains broadly on track.

JP MORGAN on DB REALTY

JP Morgan recommends `Neutral' rating on DB Realty with March '11 target price of 480. DB Realty reported Q2 net income of 120 crore marginally ahead of the estimate of 110 crore. FY11 PAT guidance stand maintained at 830 crore versus 200 crore achieved in H1. As per the company, revenue recognition of the two new projects along with the accelerated TDR sales should help PAT acceleration over H2FY11. On the pre-sales front the company has already achieved 1600 crore or about 45% of its full year target. Overall, the company continues to see healthy traction in its South Mumbai portfolio despite Q2 being seasonally weak. Additionally, response to soft launch of Bandra MIG colony has been good. However, earnings surprise over Q2/Q3, possible stake divestment of Bandra project and improvement in pre-sale levels of new projects should translate into steadily improving earnings/RoE profile.