>JET AIRWAYS (IDFC SSKI)

HIGHLIGHTS

‘We have already cut domestic capacity by ~20% yoy....exceptional efforts will be required for profitability going ahead’– Wolfgang Prock - Schauer CEO, Jet Airways

• Jet Airways (Consolidated) has reported numbers for FY09 – Revenues were at Rs130.7bn (ahead of estimates at Rs126bn), EBITDA loss at 8.6bn (against expectations of Rs8.9bn) and net loss of Rs21.2bn without exceptional items (Jet has reported a consolidated net loss of Rs9.6bn including exceptional items for the year).

• For the quarter - Jet Airways (standalone) has reported an 11% decline in revenues at Rs24.6bn, a positive EBITDAR at Rs5.1bn, EBITDA at Rs3bn (primarily due to the support from international operations and lower ATF prices in the quarter) and a net loss before exceptional items at Rs1.6bn.

• For the quarter - Jetlite has reported revenues at Rs3.1bn, a positive EBITDAR at Rs165mn, and continued to post an EBITDA loss at Rs717m and a net loss of Rs1.3bn.

• Capitalization concerns high - Jet reported consolidated debt at Rs166bn taking the debt:equity ratio to ~5X. Repayment in the current year is at ~Rs10bn. Additional outstandings for the current year include a Rs 1.4bn payment to SICCI (annual installment for the acquisition of Jetlite erstwhile Sahara).

• No capacity additions in the current year – The management is in talks with Boeing over cancelling/finding another buyer for the Boeing 777 (Capex at ~$145m) that was due for delivery in August09 (Jet had earlier deferred all future deliveries except the Boeing 777). The current operational fleet (86 aircrafts under Jet and 23 aircrafts under Jetlite) is expected to be maintained as of now. (The management plans to renew the leases that come for expiry in the current year).

• Options to fund - Sale and lease back – Inorder to meet its obligations, Jet has the option of a sale and lease back of its existing assets (39 owned planes – 21 narrow bodied aircraft and 18 wide bodied aircraft). While Jet has booked a sale and lease back of an A330 in the current quarter at a $9m profit over its book value (leading to a cash inflow of ~$85m), a premium to book value could be difficult in the current environment. Till date Jet has raised ~$2.5bn inorder to fund the acquisition of its fleet; a sale (at book value) of these assets by the end of the current year can
potentially generate cash (net of repayment of loans) to the tune of ~Rs15-18bn.

To see full report: JET AIRWAYS

>JSW STEEL (RELIANCE MONEY)

Price target achieved
JSW Steel has appreciated by more than 18%, since our last recommendation dated May 11, 2009. We had given a buy call with a price target of Rs 485 on the spectacular guidance given by the management for FY2010E and FY2011E. The management had guided for 70% rise in the production for FY2010E owing to the successful operations expected from the green field facility recently commissioned.

Indian Steel industry is exhibiting resilience:
Indian Steel industry is not showing the panicky conditions exhibited by the global steel majors. The steel prices throughout the country are stable and above the international prices which in turns are exhibiting some strength. The Indian domestic Steel prices have been steadfast. The Steel demand is expected to remain robust despite the recessionary noises through out the globe. According to World Steel Association India's apparent steel demand is forecasted to reach 53.5 mmT in CY09, a 1.7% rise over that of CY08 and is expected to reach 58 mmT in 2010, an increase of 8% YoY.

Steel prices are expected to be stable and rising:
The demand for Indian Steel Industry is expected to steady. Although, the capacity expansion projects of domestic steel majors are on track, the green field plans made by foreign Steel behemoths like POSCO and Arcellor Mittal have been deferred. The mismatch between expected demand and supply is expected to keep the prices steady and rising.

Valuation:
At CMP of Rs 511, the stock quotes at an EV/EBIDTA of 1.7x FY2011E earnings. Currently, we feel that the pricing of the stock is stretched. We advise the clients to book profits at this price and re-enter at lower levels although we are positive on the future prospects of the company.

To see full report: JSW STEEL

>IRB INFRASTRUCTURE DEVELOPERS LIMITED (DOLAT CAPITAL)

IRB’s FY09 results were in line with our estimates. The consolidated net revenue has grown by 35% YoY on the back of ~23% YoY increase in toll revenue and ~56% YoY increase in construction revenue. However, margins have shown a dip due to rise in construction cost on account of higher raw material prices. The construction cost saving upto 20% is estimated on Surat Dahisar BOT which will have a positive impact on the project and aggregate NPV. However, it would be too early to factor in this development as the project has just begun and will be completed in the next 28 months. We believe, in the current scenario, change in our assumptions (traffic growth rate, cost of equity and debt, toll escalation rate) are not warranted. Our calculation suggests the NPV of BOT projects will have the highest sensitivity to the traffic growth rate amongst other factors. We have valued the stock on SOTP (BOT – NPV and EPC – PER) method and believe that the stock remains overvalued at these levels. We maintain a SELL on the stock with target price of Rs 67(BOT - Rs.56 and EPC - Rs.11).

Order book details
The Company has an order book of Rs.58.9 bn as on 31st March 2009 (of which O&M work accounts for 43.7%, EPC in ongoing BOT projects accounts for 51.6% and rest 4.6% is attributed to funded projects). Further, the EPC order book of Rs.30.46 bn is confined to construction work of ~300 kms, out of which Surat Dahisar accounts for 239 kms and KIRDP (Kolhapur Road Integrated Development Programme) for 50 kms. The company expects to execute the order book in next two and half years.

Project update

Surat Dahisar BOT
The EPC cost of the project (~Rs.25 bn) is expected to be reduced by ~20% on account of reduction in raw material prices and cost of funding. This is expected to result in a saving of around Rs.5 bn. However, it would be too early to predict the extent of cost saving as only 2 months of construction period has gone by out of a total period of 30 months. Hence, any upward movement in RM cost in the balance period of construction might not reduce the construction cost to the extent of 20% as anticipated by the company.

IRB has started collecting toll from 20th Feb 2009 on this stretch and has so far collected Rs.335.9 mn on gross level (around 7.3% contribution to total toll revenue) but this is lower than earlier expectation by around ~26%. The current run rate is ~Rs.8.5 mn/day on the gross basis as against the expected ~Rs.11.5 mn/day. The lower toll collection is on account of lesser port traffic on the stretch due to slow down in exports and economic activities.

Sensitivity of NPV to change in construction cost (EPC) at constant 6% traffic growth
The NPV of Surat Dahisar BOT will range between - Rs.4.82 per share to Rs 3.71 per share for 0% to 20% cost saving in construction expense.

Our aggregate NPV is estimated to improve between 3.8% to 15.3% for reduction in construction cost between 5% to 20%. (NPV range – Rs 55.90 per share to Rs 64.43 per share).

To see full report: IRB INFRASTRUCTURE

>CINEMAX INDIA (RELIGARE)

Margin pressure continues

Sales in line with estimates: Cinemax India’s consolidated revenues for Q4FY09 rose 34.9% YoY to Rs 334mn, broadly in line with our estimates. The exhibition business was the main revenue growth driver, rising 43.4% YoY to Rs 308.3mn. Income from the retail space stood at Rs 22.5mn, while windmill and distribution/production revenue stood at Rs 3.1mn and Rs 0.3mn respectively.

Exhibition revenues increased because of the addition of 22 new screens during the year along with higher footfalls, although the average occupancy dipped to 25% in Q4 from 29% in comparable properties, and average ticket price (ATP) declined marginally to Rs 129. Occupancy in non-comparable properties was 28% and ATP stood at Rs 118. F&B spend per head at comparable properties increased to Rs 31 from Rs 29 in Q4FY08, whereas it stood at Rs 27 for noncomparable properties.

Lower occupancy rates and decline in ATP lead to margin pressure: Operating profit declined 25.8% YoY to Rs 35mn owing to lower occupancy rates and ATP. Film distribution cost increased to Rs 67.7mn, rising by 70bps as a percentage of net revenue to 20.3%. Other expenses rose by 68% to Rs 182mn, accounting for 54.4% of net revenue (up 1,080bps). F&B cost and employee cost stood at Rs 18.4mn and Rs 30.6mn respectively.

Net profit drops 55.8% YoY: Cinemax reported a PBT of Rs 2mn in Q4FY09 against Rs 37mn in Q4FY08. In spite of a tax write-back of Rs 8mn, PAT declined 55.8% YoY to Rs 10mn.

Operational highlights – 16 new projects in the pipeline: Cinemax is present in 25 locations as of Q4FY09 with 74 screens, including 5 added during the quarter. The number of footfalls has increased from 6.6mn in Q3FY09 to 8.5mn in Q4FY09. The company has a total of 16 new projects in the pipeline which will add 55 screens and 12,678 seats by FY10.

Earnings estimates cut – Hold: The stock is quoting at 10.2x P/E and 7.5x EV/EBITDA on FY10E. We have reduced our net profit estimate for FY10 by 12.4%, on account of lower revenue estimates given the standoff between producers and multiplex owners. In addition, we have switched over from a DCF-based valuation to a P/E model in order to capture the overall re-rating in the media sector. Our revised price target thus stands at Rs 61, based on a P/E of 10x on FY10E. We upgrade the stock from Sell to Hold.

To see full report: CINEMAX INDIA