Fw: Sharekhan's top equity mutual fund picks

 

 

Mutual Gains [December 19, 2012]  Sharekhan www.sharekhan.com

Summary of Contents MUTUAL GAINS Sharekhan's top equity mutual fund picks Large-cap funds Mid-cap funds Multi-cap funds Birla Sun Life Frontline Equity Fund - Plan A IDFC Sterling Equity Fund ICICI Prudential Discovery Fund - Growth Birla Sun Life Top 100 Fund Kotak Midcap Fund Canara Robeco Equity Diversified - Growth ICICI Prudential Focused Bluechip Equity Fund - Ret HDFC Mid-Cap Opportunities Fund Reliance Equity Opportunities Fund - Growth Reliance Top 200 Fund SBI Magnum Sector Funds Umbrella - Emerg Buss Fund SBI Magnum Global Fund 94 - Growth UTI Wealth Builder Fund - Series II IDFC Premier Equity Fund - Plan A UTI Opportunities Fund - Growth Indices Indices Indices BSE Sensex BSE MID CAP BSE 500 Tax saving funds Thematic funds Balanced funds Canara Robeco Equity Taxsaver - Growth Birla Sun Life India GenNext Fund - Growth Birla Sun Life 95 - Growth Reliance Tax Saver (ELSS) Fund - Growth Canara Robeco FORCE Fund - Reg - Growth HDFC Balanced Fund - Growth Franklin India Taxshield - Growth Sundaram Rural India Fund - Reg - Growth Reliance RSF - Balanced - Growth ICICI Prudential Taxplan - Growth L&T India Special Situations Fund - Growth UTI Balanced Fund - Growth BNP Paribas Tax Advantage Plan - Growth UTI India Lifestyle Fund - Growth ICICI Prudential Balanced - Growth Indices Indices Indices CNX500 S&P Nifty Crisil Balanced Fund Index Fund focus Birla Sun Life India GenNext Fund Click here to read report: Top equity mutual fund picks   Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding or having a position in the companies mentioned in the article.

Fw: Investor's Eye: Update - Hindustan Unilever, Transmission and distribution

 

Investor's Eye [December 13, 2012]  Sharekhan www.sharekhan.com

Summary of Contents     STOCK UPDATE Hindustan Unilever Recommendation: Hold Price target: Under review Current market price: Rs520 Event Update: Unilever Indonesia hikes royalty payments to Unilever  Key points The event-Unilever Indonesia increases royalty payment to its parent Unilever: Unilever's Indonesian subsidiary, PT Unilever Indonesia, has approved a hike in royalty payments to its parent Unilever. Unilever Indonesia has agreed to pay a 5% fee and a maximum of 3% actual cost recovery as compared with the existing 3.5% fee.  Fears about similar changes in HUL's royalty fee structure: The hiking of royalty fees for Unilever Indonesia has led to fears of a similar action on Hindustan Unilever (HUL). HUL currently pays a royalty fee of 1% of the net sales for using the brands and trademarks held by Unilever. HUL has been paying 1% royalty to Unilever since August 1999 when for the first time entered it into a technical collaboration agreement with Unilever. The same was revised in December 2009, wherein additional products were added to the arrangement. The products added included product categories, where technical inputs are provided by Unilever, and products of specified categories manufactured by third-party manufacturers, where technical inputs developed by Unilever were made available to them.  It is not necessary that a similar action will be taken with respect to HUL. However, it has dented sentiments on the stock. Any adverse development on the royalty payment issue could result in an additional pressure on the margin. We believe that in the current challenging environment, with the volume growth moderating, the company may be unable to resort to price hikes to offset the impact of royalty payments.    Valuation-at a premium to long-term average multiples, any negative cue creates selling pressure: At the current market price of Rs520, the stock trades at 29.9x its FY2014E earnings per share (EPS) of Rs17.4 and 26.3x its FY2015E EPS of Rs19.8. The business fundamentals remain intact but the valuation is not cheap anymore, which led to selling pressure on negative cues. However, given the strong brand equity and quality of management, we believe that the company is likely to trade at a premium. Hence, we maintain our Hold rating on the stock with price target under review. SECTOR UPDATE Transmission and distribution Still not out of the wood; though there are signs of competition softening   Key points Relatively weaker flow YTD: The order awarding activity of Power Grid Corporation of India Ltd (PGCIL) picked up in September at around Rs1,873 crore. However, October and November (part of Q3FY2013) have broadly recorded average ordering to the tune of ~Rs700 crore in each month. In Q3FY2013, we expect that PGCIL will find it difficult to catch up with order flow compared with that of Q3FY2012, given the year-till-date (YTD) order flow. However, going by the historical trend, significant (almost 40-50%) ordering is expected in Q4FY2013.  Transmission line segment remained the highest contributor, while KPTL and KEC regained the market share: Among segments, order from the transmission line segment remained the highest growth contributor in YTDFY2013, contributing around 35% (excluding transmission line order of high-voltage direct current [HVDC] multi-terminal system worth Rs2,500 crore during June 2012). In the transmission line segment, we observed that (KEC; 17%) and Kalpataru Power Transmission Ltd (KPTL; 14%) regained their market share YTD.  Rise in share of international players; a trend or aberration?: Overall, the domestic players dominated the PGCIL order flow for many years. However, in YTDFY2013, the market share of international players touched around 21% YTD. Even this is relative higher compared with the market share of 10% in FY2012, excluding HVDC order worth Rs2,495 crore. However, it is still early to believe that there is a change in trend. Competition still alive; though there are signs of softening: Competition has intensified in the last couple of years but our interaction with several companies hints that the intensity is softening. We also found that in the sub-station and transmission segments, the average bidder per contract stepped down from FY2011 to FY2013. In case of the transmission line segment, the average bidders were six in YTDFY2013 compared with nine in FY2012 and seven in FY2011. In the sub-station segment, the average bidders were eight in FY2011 which dropped to six in YTDFY2013. In the conductor segment, the average bidder remained around four in YTDFY2013.  Further, we found that the percentage of orders that received bid from more than ten participants fell from 48% in FY2011 to 12% in FY2012 and 19% in YTDFY2013. The transmission line segment also replicated the trend. However, the conductor segment defers from this trend as there is an increase in the number of bidding per contract from FY2011 to YTDFY2013.  Near- to medium-term order flow to taper down from PGCIL; though global opportunity visible: Our interaction with the management of PGCIL revealed that around Rs70,000 crore of orders were already placed by the company out of the total approved investment worth Rs85,500 crore for the 12th five-year plan. Out of the approved investment, around Rs15,000 crore of ordering is pending. PGCIL would require additional orders worth Rs15,000 crore to touch the target of Rs100,000 crore. So, we believe that till the end of FY2015, ordering could be around Rs30,000 crore on the higher side from the PGCIL. Ordering from the PGCIL crossed Rs18,000 crore in FY2011 and Rs22,000 crore in FY2012, which should not be above Rs15,000 crore on an average in the next two years. Hence, we maintain our cautious stance. Nevertheless, opportunity from the international market is likely to remain buoyant driven by the aging infrastructure requiring replacement, investment driven by American Recovery and Reinvestment Act and finally due to a smart grid and focus on renewable sources. Click here to read report: Investor's Eye   Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding or having a position in the companies mentioned in the article.

Fw: Investor's Eye: Update - Eros International Media (Emphasis on monetisation of content); Viewpoint - Sunteck Realty (New kid on the block)

 

 

Investor's Eye [December 10, 2012]  Sharekhan www.sharekhan.com

Summary of Contents     STOCK UPDATE Eros International Media Recommendation: Buy Price target: Rs267 Current market price: Rs224 Emphasis on monetisation of content We recently attended the select analyst meet hosted by Eros International Media Ltd (EIML) to discuss the company's joint venture with HBO Asia. The highlights of the meeting are as follows. Key terms of the venture HBO Asia and Eros International plc, the promoter of EIML, would be launching two new premium advertising free movie channels in India: HBO DEFINED and HBO HITS. The funding and the expenses of the venture would be borne by HBO Asia. EIML's contribution to the joint venture would be to provide exclusive satellite rights for one month of 10-12 new releases of the year and give a library of about 100 movies (currently EIML has movie library of more than 1,100 movies). The new releases would be telecast first on one of the two channels with a one-month exclusivity after which the same would be shown on any other television channel (that may have acquired the satellite rights of the films). The impact of the venture on EIML Positives The company does not have to invest any capital in the joint venture and will provide the content only for which it will be getting a fixed income irrespective of the joint venture's profit.  The deal would lead to further monetisation of content library. The company would get the rights to the original HBO content that it can use in the future to produce television series in India. The company does not have any immediate plans for the same. It is the company's discretion which new releases it wants to showcase on the two channels. Negatives The select new releases that would be showcased first on the premium channels would lead to lower satellite right price offered by the general entertainment channels.  Competition could also launch similar premium channels which could lead to a fall in viewership.  Valuation: As we have highlighted in our earlier notes, EIML is a beneficiary of the digitisation era. The proposed joint venture with HBO Asia to launch premium movie channels is a step in that direction. Further, it will help EIML to monetise its content library further and lower the dependence on the box-office revenues to some extent, though any meaningful benefit will accrue only over the longer term. We are positive on this joint venture and the company's intent to diversify its revenue generating platforms. However, we do not see any meaningful financial benefits accruing to the company in the medium term. Thus, we will wait for further developments in this joint venture to incorporate the financial impact of the same on our estimates. We maintain our Buy rating on the stock with a price target of Rs267. VIEWPOINT Sunteck Realty New kid on the block Key points Luxury real estate developer with a focus on Mumbai: Sunteck Realty Ltd (SRL) is a leading Mumbai-focused real estate company with more than a decade of experience and a presence in the premium and super-luxury segments. The company has over 36 million square feet of city centric developments at the consolidated level, which includes 26 projects and four rented assets. Of these developments, more than 80% of the projects are into premium luxury residential segment and remaining in the commercial segment. The company has strong execution skills through its in-house project management team and tie-ups with domestic and international contractors.  Strong project portfolio with asset-light business model: The company has done a series of smart land acquisitions at a low cost and developed many ultra-premium residential projects largely across Mumbai. Currently, the company has a total of 21 projects in Mumbai with a total saleable area of 25.7 million square feet of which SRL's share is 14.62 million square feet. Other than Mumbai, the company has around 10.42 million square feet of saleable area of which SRL has an economic interest on around 3.25 million square feet. Some of its key projects like Signia Pearls, Signia Isles, Signature Island and Sunteck City are all located in Mumbai. Further, in order to expand the scale of business with a low leverage, the company has adopted an asset-light business model. The company's business strategy is characterised by the smart use of the joint venture/joint development agreement model to acquire land, which resulted in low acquisition costs, thereby generating high internal rate of return projects.  Financial performance to improve from H2FY2013: During Q2FY2013, the company managed to sell a total area of 100,340 square feet at an average realisation of Rs23,427 per square feet. The strong sales volume is largely supported by projects in Bandra Kurla Complex (BKC). Further, in terms of cash inflow, the company has collected an advance of Rs135 crore as compared with just Rs43 crore in Q1FY2013. Going ahead, from H2FY2013, we believe the robust growth in the earnings and cash flow will be on account of revenue booking from its BKC projects and launch of new projects. In H2FY2013, the company is targeting to launch four new projects namely Poonam in Andheri, Signia in Navi Mumbai and project in Kalina and Mulund.  Strong cash flow visibility with lower D/E ratio: SRL has already sold a major portion of its launched projects, which provides cumulative gross sales of around Rs2,417.9 crore as against cumulative customer advances of around Rs1,100.2 crore at the end of H1FY2013. This would provide a strong cash flow visibility in the near term and would also take care of timely execution of the projects and new acquisitions. In addition to this, the company also has a regular cash flow coming from its four leased properties. Further, with the asset-light business model, the company managed to maintain a low debt level. The consolidated debt of the company stood at Rs488 crore, which represents a comfortable debt/equity (D/E) ratio of 0.7x.  Limited track record with only one completed commercial project to showcase: Though the company has a good project portfolio with a low acquisition cost, timely execution of the projects is one of the key challenges to the company as the company has completed only one commercial project so far. Further, the supply in Mumbai's real estate market has increased significantly both in the commercial and residential space, which could affect the pricing scenario adversely and could also affect the operational and financial performance of the company. Outlook: With the launch of new projects by the end of FY2013, improved traction in BKC projects and a diversified project portfolio across Mumbai, strong sales are expected going forward. Further, we believe SRL is well positioned in the Mumbai region with a strong project portfolio and a strong balance sheet (D/E of just 0.7x FY2012). At the current market price (CMP), the stock is trading at price/earnings (P/E) of 8.8x discounting its FY2013E earnings per share (EPS; based on the Bloomberg's consensus estimates). The stock is not under our active coverage. Hence, we do not have any rating on the company. Click here to read report: Investor's Eye   Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding or having a position in the companies mentioned in the article.

Fw: Company Report - Steel Authority of India Ltd and Express Idea - Midcap

 

Steel Authority of India Ltd: Not yet out of the woods – SELL CMP Rs83.2, Target Rs70.7, Downside 15% Steel Authority of India Ltd (SAIL) has underperformed the Sensex by 19.7% over the past one year, on account of concerns over the delays in the company's expansion projects, lower margins and availability of iron ore. SAIL's expansion plans have been facing delays in project implementation besides cost escalation. Projects which were earlier expected to be completed by FY12 are now estimated to get over in a phased manner by FY14E. Volume growth over the last five years has remained stagnant due to delay in capacity addition and technical issues at various plants. We believe these issues would continue over the next one year as benefits of the new capacities would set in only from H2 FY14. We expect sales volume growth to remain flat in FY13 and increase 9% yoy to 12.8mn tons in FY14 as the impact of incremental production from new capacities would be offset by the shutdown of old facilities. The full benefit of new capacities would be witnessed only by FY15, where we expect the company to register a volume growth of 14.6% yoy to 14.7mn tons. SAIL's Gua mines have remained closed since June '11 and its Bolani mines were also shut for a month due to expiry of forest clearance. The company's margins have been hit over the last two years on the back of high fixed costs, high coking coal costs, increase in consumption of externally purchased coke and degrading product mix. EBIDTA/ton in Q3 FY13 is expected to decline to its lowest level since FY04 as steel prices decline sequentially. Though we expect margins to improve going ahead, we believe it would remain below its 5-year historical average. Earnings growth would further decline on account of rising interest costs and depreciation. At the CMP, the stock is trading at 7.2x FY14E EV/EBIDTA, higher than its domestic as well as international peers. We assign no value to the company's CWIP, given the dismal track record of SAIL's execution capabilities. We value SAIL at 6.5x FY14E EV/EBIDTA and arrive at a fair value of Rs70.7. At the CMP, the stock is 15% above our fair value; Initiate coverage with a SELL rating. Click here for the detailed report on the same. Midcap Trades After underperforming in 2011, Indian equities have outperformed its global peers in 2012 year-to-date. Initially, the rally was limited to large caps. However, over the past 3 months, small and mid cap stocks (a jump of 17% in CNX Midcap) have recorded smart gains. Likelihood of continued Government action (most recent being passing of opening of FDI in retail in Lok Sabha) and a supportive global sentiment is expected to trigger further upside in the stock market. A possible cut in CRR in the upcoming RBI policy meet and Repo cuts from January 2013 are added triggers which can further accentuate the current momentum. Based on our reading of charts, the Nifty appears headed towards the 6,400 mark, which implies 8.5% upside from current level. We believe midcaps could rally even more, possibly 15-25 in case of many companies. We recommend 9 midcap ideas based on technical analysis. We have categorized our picks into the following three buckets based on technical indicators: Category Action advised Stocks I Momentum trades JB Chemicals, Divis Labs, Shriram Transport, IB Real Estate II Bottom fishing ideas Adani Enterprises, Punjab & Sind Bank, Phoenix Mills III Defensive bets DCB, Vijaya Bank Recommendation Stock Reco Price Target SL Exp. Returns (%) Momentum Trades J.B. Chem 86 98.5 75.5 15 Divis Labs 1162 1320 1120 14 IB Real Estate 75 89 65 19 Shriram Transport 691 750 640 9 Bottom Fishing Ideas Adani Ent 249 275 232 10 Phoenix Mills 233 300 195 29 PSB 72 81 66 13 Defensive Bets DCB 47 55 42 17 Vijaya Bank 61 71 51.5 16 Click here for the detailed report on the same. Warm Regards, Amar Ambani

Confidentiality & Disclaimer: This message contains confidential information and is intended only for the individual named. If you are not the named addressee you should not disseminate, distribute or copy this e-mail. Please notify the sender immediately by e-mail if you have received this e-mail by mistake and delete this e-mail from your system. E-mails are not encrypted and cannot be guaranteed to be secured or error-free as information could be intercepted, corrupted, lost, destroyed, arrive late or incomplete, or contain viruses. The sender, which includes India Infoline Limited and its group companies, will not be liable for any errors or omissions in the contents of this message which arise as a result of e-mail transmission. If verification is required please request a hard-copy version. This message is provided for informational purposes and shou! ld not be construed as a solicitation or offer to buy or sell any securities or related financial instruments.

Fw: Investor's Eye: Thematic Report (Piping hot); Update - HDFC Bank (Price target revised to Rs712)

 

 

Investor's Eye [December 07, 2012]  Sharekhan www.sharekhan.com

Summary of Contents   THEMATIC REPORT Piping hot Key points Global demand-supply gap to widen: CY2012 began with a production shortage of 12.5 million kg. With tea production down in the key black tea exporting countries, the demand-supply gap in the international market is expected to rise further at the end of the year. As per industry data, black tea production from key tea exporting countries for the first nine months of 2012 dropped by about 3% year on year (YoY; or 41 million kg) to 1,427.5 million kg. The industry expects CY2012 to end with a production shortfall of around of 50 million kg of black tea.  Domestic tea prices to remain firm, to benefit domestic tea companies: The supply shortage in the domestic and international markets has led to a spike in the tea prices in the domestic market. The raw tea prices in India are currently trading at Rs15-20 per kg, higher than last year's price. However, with a lower yield the sales volume has been affected for most. Hence, we don't expect any significant expansion in the margins of the domestic tea players in FY2013. With the demand-supply gap likely to expand further in the coming months, the tea prices are expected to rise higher in the next year. On the back of expectations of stable sales volume, we might see the profitability improve substantially in FY2014.  Maintain Buy on Mcleod Russel, recommend Jayshree Tea as a short-term trading idea: Indian tea is gaining preference in the international markets while the domestic tea market is growing at a steady pace of 2-3% YoY. The favourable demand-supply environment would keep the Indian black tea producers in a sweet spot, as tea prices are expected to remain firm in the domestic and international markets with no signs of easing of the deficit globally. We believe companies like Mcleod Russel, Jayshree Tea India Ltd (JTIL), Harrison Malayalam, Warren Tea and Goodricke are likely to witness an improvement in profitability in the coming years. We maintain our Buy recommendation on Mcleod Russel with a revised price target of Rs381 (10x based on average FY2014-15 earnings of Rs38.1). JTIL is another key domestic player that is likely to witness a handsome improvement in its profitability in the near term. Hence, we recommend it as a short-term trading idea (with a six-month time horizon).    STOCK UPDATE HDFC Bank Recommendation: Hold Price target: Rs712 Current market price: Rs693 Price target revised to Rs712 We interacted with the management of HDFC Bank to discuss the growth outlook in the evolving macro environment. The key highlights are as under: Operating leverage to play out Due to a sharp increase in the number of branches (819 branches added in the past three years) that too outside the top ten cities, the cost-to-income ratio increased to 49.0% from 48.0%. Of the total 2,620 branches, around 895 branches are around 24 months old and are close to break-even. Generally, it takes around two to three years for these branches to break-even and slightly lesser in case of branches located in top cities. Further, the average branch addition is likely to slow down to around 250 per year, which would aid in lowering the cost-to-income ratio to 46% levels (50-70 basis points/year) over the next two to three years. Corporate lending book to grow at ~15% while retail to remain a key driver  Though the bank's loan book grew by ~23% year on year (YoY) in Q2FY2013, the bank expects the FY2013 loan growth to be around 22% YoY. Within this, the corporate loans are expected to grow at a slower rate of 10-15% YoY, whereas the retail loans will continue to grow at a healthy rate of 26-28%. As the bank penetrated in newer geographies, the components within the retail (vehicle loans, gold loans etc) are showing a strong traction. Further, the revised priority sector norms will facilitate lending in the sector and the bank expects to meet the requirement of the sub-heads (within overall limit of 40%) in the next 18 months. NIMs likely to remain stable  The bank's 70% of the liabilities are retail in nature and are expected to get re-priced over Q3FY2013 and Q4FY2013. This is likely to ease the pressure on the net interest margins (NIMs) due to a decline in yield on asset book. Moreover, the bank has one of the highest current and savings account (CASA) ratios in the sector (45.9% in Q2FY2013), while 70% of the non-CASA deposits are from the retail customers. Therefore, the NIMs are likely to be maintained at 4.2-4.3% level. Outlook and valuation HDFC Bank stands out from other banks as it delivered a consistent growth in its profits coupled with an impeccable asset quality. Going forward, the steady margin and a strong growth in the retail segment will drive the operating performance while the lower slippages are expected to moderate, keeping credit costs under check. Consequently, we expect the bank's earnings to grow at a CAGR of 21.6% over FY2012-15. On the valuation front, the stock currently trades at 4x its FY2014 and 3.4x its FY2015 book value. We are rolling over the price target on an average book value of FY2014 and FY2015 by keeping the multiple same. Thus, our revised price target stands at Rs712 (3.8x average of FY2014/FY2015 book value). Given the limited upside, we maintain Hold rating on the stock. Click here to read report: Investor's Eye

Fw: Stock Idea: Zee Entertainment Enterprises (Broadcasting the future)

 

 

Stock Idea [December 06, 2012]  Sharekhan www.sharekhan.com

Summary of Contents   STOCK IDEA Zee Entertainment Enterprises Recommendation: Buy Price target: Rs255 Current market price: Rs210 Broadcasting the future Key points  Prime beneficiary of digitisation: Among the key stakeholders of the domestic television industry, we expect broadcasters to be the prime beneficiary of the mandatory digitisation process initiated by the government. The broadcasters would benefit from higher subscription revenues at the least incremental capital expenditure (capex) as the subscriber declaration improves in the cable industry. The completion of phase I of the digital addressable system (DAS) roll-out on October 31, 2012 (except in Chennai), though with a delay of four months from the earlier deadline, shows the positive intent of the government and the other stakeholders and gives us confidence about the roll-out of the future phases. Zee Entertainment Enterprises Ltd (ZEEL), a leading broadcaster in India with a bouquet of more than 30 channels, would be best placed to benefit from the complete digitisation initiative undertaken by the government. MediaPro Enterprise India Pvt Ltd (MediaPro), a joint venture with Star TV to jointly distribute channels of both the companies as a bouquet, would further drive the company's subscription revenues. We expect the subscription revenues of ZEEL to grow at a compounded annual growth rate (CAGR) of 24.6% over FY2012-15.  Renewed positioning to boost advertisement share: In the last three quarters Zee TV, the flagship channel of the company, has consistently gained market share among the top four Hindi general entertainment channels (GECs). Zee TV's market share has improved from 16.5% in Q3FY2012 to 22% in Q2FY2013, with gross rating points (GRPs) of 237 in Q2FY2013. After languishing at the fourth place among the top four GECs in CY2011, Zee TV re-emerged in the second or close second spot gaining viewership share in the recent quarters as well as hitting the top spot in weeks 33 and 36 of CY2012. Its advertisement revenues have shown a significant improvement with a 26% year-on-year (Y-o-Y) growth in H1FY2013. In the recent quarters, ZEEL has gradually increased its investments in the reality content ("Dance India Dance" and "Sa Re Ga Ma Pa") as well as acquired satellite rights of big movies ("Agneepath" and "Don 2"). We believe the company's renewed strategy to invest in quality reality content and big-star movies would augur well for the advertisement revenues. We expect ZEEL to grow at a rate higher than the industry average in FY2013-15E.  Strong balance sheet with healthy return ratios: By FY2015, we expect ZEEL's cash flows to improve significantly with a jump of around 75% from the FY2012 cash and cash equivalents of Rs1,060.7 crore. With the management comfortable with a cash level of around Rs800-900 crore in the balance sheet and expectations of an increase in the cash level to around Rs1,900 crore by FY2015, we expect ZEEL to reward its shareholders with a higher dividend pay-out or share buy-back programme. In the last three years, the dividend pay-out ratio has been around 25-30%, which will increase in the coming years. Also, in the last two years the company has initiated two share buy-back programmes acquiring shares of cumulative value of Rs290 crore. Thus, there is a likelihood of a further reward for the shareholders in the coming years. That's not all, with strong predictability of its earnings the return ratios are set to improve in the next three years.  Valuation-integrated media baron deserves premium valuation: On the back of an improvement in the earnings predictability driven by significant subscription revenues (a digitisation boost) and above-industry advertisement growth coupled with a gradual improvement in the margin profile, ZEEL's earnings are expected to grow at a CAGR of 25% over FY2013-15. Further, strong cash levels would drive the management's inclination to reward the shareholders which would act as a positive trigger for the stock. Being one of the the largest integrated media broadcasters with a strong reach across the globe ZEEL deserves a premium valuation. At the current market price of Rs210, the stock trades at 23.1x and 18.6x earnings estimates, and 15.7x and 12.4x enterprise value (EV)/EBITDA at FY2014 and FY2015 estimates respectively. We value ZEEL at 25x average earnings per share (EPS) of FY2014-15E, which is in line with the last eight years' average trading multiple of the company. We are taking a longer period trading multiple to capture both the upcycle and the downcycle of the company. We initiate coverage on ZEEL with a Buy recommendation and a price target of Rs255. Click here to read report: Stock Idea   Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding or having a position in the companies mentioned in the article.