Stock Views on RELIANCE COMMUNICATIONS, TATA STEEL, PETRONET LNG

UBS on PETRONET LNG

UBS maintains `Buy' rating on Petronet LNG with a price target of 150. Japan's earthquake/tsunami could potentially increase Japan's LNG imports, which account for around 35% of global LNG imports. UBS estimate nuclear plant downtime will add 10-15 bcm of imports to Japan, possibly lowering oversupply and putting upward pressure on spot prices. PLNG expects some GAIL/GSPL cargo to be regassified, and their supply may already be tied in. Currently, 86% or 8.6 mmtpa of Dahej supply is tied in through medium- and long-term contracts. Including future Kochi capacity, around 57% is on term. For FY12, UBS assumes only 0.6 mmtpa of spot. PLNG continues to scout for term supply contracts. Gas supply constraints and new GAIL pipelines continue to be catalysts for the stock.

CLSA on TATA STEEL

CLSA reiterates `Buy' rating on Tata Steel with a target price of 810. Tata Steel is on the cusp of a structural improvement in its growth profile. CLSA sees Indian capacity rising 43% and greater raw material security from new mine starts in Canada and Mozambique by end-FY12. CLSA expects a 22% earnings CAGR for Tata in FY12-15. With meaningful derisking - reduced steel price sensitivity and balance sheet deleveraging - underway, the stock can rerate. A tightening Indian steel demand-supply imbalance and Tata's captive raw material advantage in an age of higher prices augur well for margins in its local business. Tata Steel is on the cusp of a strong growth phase driven by multiple earnings catalysts. The low-cost Indian operations will account for a larger share of consolidated volume. The sensitivity of earnings to steel prices will decline and balance sheet deleveraging will gather pace in the coming years.

CITIGROUP on RELIANCE COMMUNICATIONS

Citigroup upgrades the rating of Reliance Communications to Buy' from `Sell'. RCOM's stock has fallen sharply in the last one month on news flows around the 2G spectrum controversy. However, at current levels, the stock trades at a 12% discount to Bharti, below its replacement cost and factors in most of these concerns. The new target price comprises core business at 110, based on 6.3x FY12E EV/EBITDA which is at a 25% discount to Bharti's and net tower value accretion of Rs 25/share. Citigroup reduces 8 per share from the on-cash outgo based on a 50% probability of the government charging the "market" value for the GSM spectrum allotted in 2008 for 1,650 crore. RCOM's asset basket consisting of the CDMA/GSM/3G spectrum, fibre network and tower portfolio is geared towards mobile data growth. The company has been experiencing lacklustre business momentum with low utilisation of its GSM network versus its larger peers. Citigroup believe kick starting of the business momentum and any steps towards deleveraging will be critical for a sustained rerating.