Dear All,
Forwarding you the Result Flash on SAIL for 4QFY2011.
SAIL’s net sales declined 0.1% yoy to Rs11,945cr in 4QFY2011, well below our estimates of Rs13,307cr. Despite modest decline in net sales, net profit declined 27.7% yoy to Rs1,507cr, slightly below our estimate of Rs1,566cr, mainly due to increase in prices of key inputs (mainly coking coal) and rising staff costs. We will review our estimates for FY2012 and FY2013 post conference call on May 02, 2011. Although we may lower our estimates for FY2012 and FY2013 slightly, (given the recent decline in the stock price) we upgrade the stock to a BUY from an Accumulate while we keep our target price under review.
4QFY2011 consolidated financial result highlights-
· Net sales declined 0.1% yoy to Rs11,945cr in 4QFY2011, well below our estimates of Rs13,307cr. The company produced saleable steel of 3.43mn tonnes (+5.0% yoy) during the quarter.
· EBITDA decreased 24.4% yoy to Rs2,340cr, while EBITDA margin declined 631bp yoy to 19.6% due to increase in prices of key inputs (mainly coking coal) and rise in staff costs.
· Net profit declined 27.7% yoy to Rs1,507cr, slightly below our estimate of Rs1,566cr in 4QFY2011. For FY2011, its net profit declined 27.7% yoy to Rs4,881cr mainly on account of weaker demand of flat products and increase in staff expenses (+40.8% yoy).
· The company spent Rs11,280cr in FY2011 (+6% yoy) for expanding capacity at its existing plants. The company plans to spend capex of Rs14,300cr in FY2012 mainly towards expanding its capacity and modernizing its existing plants.
· As of March 31,2011, the company’s debt and cash balance stood at Rs20,162cr and Rs17,000cr, respectively.
Exhibit 1: 4QFY2011- Actual vs. Estimates
| (Rs cr) | Actual | Estimates | Variation (%) |
| Net Sales | 11,945 | 13,307 | (10.2) |
| EBITDA | 2,340 | 2,342 | (0.1) |
| EBITDA margins (%) | 19.6 | 17.6 | 199bp |
| PAT | 1,507 | 1,566 | (3.8) |
Source: Company, Angel Research
Exhibit 2: 4QFY2011 Performance summary
| (Rs cr) | 4QFY11 | 4QFY10 | yoy (%) | FY2011 | FY2010 | YoY% |
| Net sales | 11,945 | 11,955 | (0.1) | 42,720 | 40,551 | 5.3 |
| Raw material | 5,419 | 5,157 | 5.1 | 18,909 | 17,166 | 10.2 |
| % of net sales | 45.4 | 43.1 | 44.3 | 42.3 | ||
| Consumption of stores & spares | 631 | 622 | 1.4 | 2,393 | 2,621 | (8.7) |
| % of net sales | 5.3 | 5.2 | 5.6 | 6.5 | ||
| Power & fuel | 948 | 949 | (0.2) | 3,590 | 3,359 | 6.9 |
| % of net sales | 7.9 | 7.9 | 8.4 | 8.3 | ||
| Staff cost | 2,052 | 1,638 | 25.3 | 7,627 | 5,408 | 41.0 |
| % of net sales | 17.2 | 13.7 | 17.9 | 13.3 | ||
| Other expenditure | 777 | 766 | 1.5 | 3,225 | 2,809 | 14.8 |
| % of net sales | 6.5 | 6.4 | 7.6 | 6.9 | ||
| Total expenditure | 9,826 | 9,133 | 7.6 | 35,745 | 31,362 | 
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