Analysts' Picks: MTNL
Merrill Lynch has maintained its ‘underperform’ rating on the stock with a lowered target price of Rs 65 from Rs 110 earlier, saying it has valued the company’s core telecom business at a 25% discount
By ET Bureau |
MTNL
cmp: Rs 71.50
target price: 65
Merrill Lynch has maintained its ���underperform��� rating on the stock with a lowered target price of Rs 65 from Rs 110 earlier, saying it has valued the company���s core telecom business at a 25% discount. ���The discount captures the risk of potential large cash outgo towards its assured 3G licences. The stock appears cheap at a price/book of around 0.4 times FY09 and this reflects its low RoE (return on equities) of around 2-3%,��� said Merrill Lynch in a note to its clients.
Merrill Lynch has cut earnings by 35% for FY09E and 29% for FY10E. ���This reflects around 3-5% cut in topline and 4% rise in operating costs. We now forecast MTNL���s EBITDA margin at 11-13% for FY09-10E vs 10% margin in 1H FY09,��� the note said. ���Revenue outlook remains weak due to continuing fixed-2-mobile substitution. Meanwhile, cost pressures are on the upside due to pending wage revision and sticky overheads,��� the note added.
target price: 65
Merrill Lynch has maintained its ���underperform��� rating on the stock with a lowered target price of Rs 65 from Rs 110 earlier, saying it has valued the company���s core telecom business at a 25% discount. ���The discount captures the risk of potential large cash outgo towards its assured 3G licences. The stock appears cheap at a price/book of around 0.4 times FY09 and this reflects its low RoE (return on equities) of around 2-3%,��� said Merrill Lynch in a note to its clients.
Merrill Lynch has cut earnings by 35% for FY09E and 29% for FY10E. ���This reflects around 3-5% cut in topline and 4% rise in operating costs. We now forecast MTNL���s EBITDA margin at 11-13% for FY09-10E vs 10% margin in 1H FY09,��� the note said. ���Revenue outlook remains weak due to continuing fixed-2-mobile substitution. Meanwhile, cost pressures are on the upside due to pending wage revision and sticky overheads,��� the note added.
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