Stock Views on RELIANCE INDUSTRIES, JAGRAN PRAKASHAN, USHA MARTIN

CITIGROUP on RELIANCE INDUSTRIES

Citigroup reiterates `Buy' rating on Reliance Industries with a target price of 1,184. On top of a 20% year to date underperformance, RIL has continued to lag the Sensex recently despite a robust petrochemical and refining recovery, as negative news flow on KG gas ramp-up has continued to affect stock sentiment. However, Citigroup believes that while E&P disappointment is now fully priced in, strength in its cyclical businesses offsets most of the negatives, making risk/reward compelling. They also see stronger ethylene margins over CY12-14 as supply growth comes off, though CY11 margins could remain capped. Recent discussions with the management suggest that RIL is in dialogue with the government for higher gas prices for new production. Also, the government has recently allowed ONGC to charge a price of US$5.25 for non-priority customers, further indicating its willingness to raise prices.

DEUTSCHE BANK on JAGRAN PRAKASHAN

Deutsche Bank initiates coverage with a `Buy' rating on Jagran Prakashan and a target price of 185. The Hindi print media leader Jagran Prakashan is well positioned to deliver a 25% CAGR in earnings over FY10-12E as a strong economy drives local and national advertising to the regional leaders. Deutsche Bank believes that the company is well placed to tackle emerging competitive pressures and newsprint costs. A 225-crore funding from Blackstone has put the group in an enviable position to fund its recently acquired Gujarati and Urdu language operations. The acquisition of Mid-day, an English language compact newspaper, forms part of JPL's initiative to identify growth avenues beyond the Hindi newsprint business. Mid-day owns two language publications, Mid-day Gujarati and Urdu daily Inquilab. The strategic intent is to expand into new languages via an established brand rather than build a new brand like the group built its Hindi newsprint business. Downside risks include increase in newsprint prices and increase in competition due to the entry of DB Corp in Uttar Pradesh.

EDELWEISS on USHA MARTIN

Edelweiss maintains 'Buy' rating on Usha Martin, but downgrades the relative rating to 'Sector Performer' from 'Sector Outperformer'. They cut their fair valuation from 125/share to 91/share. Usha Martin's 30-MW captive power plant is shut down since last month due to a breakdown in the turbine. Management expects to restart operations post repairs in the next seven days. However, since the company failed to procure adequate power from a local power plant in the interim, Q3FY11 production could be hit. Edelweiss, however, cuts the volume estimates from 547 kt to 519 kt for FY11 and from 750 kt to 700 kt for FY12. Thermal coal supply from UML's captive mines has been affected since the Jharkhand government has allowed loading of only 15t per truck against 30t earlier. Hence, there is an increased requirement of trucks, which is not fully met. As a result, captive coal availability is expected to reduce from 120kt in Q2FY11 to 70-80kt in Q3FY11.