Dear All,
Forwarding you the Result Flash on Sesa Goa for 4QFY2011. We maintain our Buy recommendation on the stock.
Sesa Goa announced its 4QFY2011 results yesterday, reporting total sales growth of 49.8% yoy to Rs3,624cr, above our estimates of Rs2,654cr. Total sales were above our expectations on account of higher-than-expected realisation on iron ore sales as well as sales volumes. We will raise our iron ore sales realization estimates modestly for FY 2012 and FY2013. However, we await for further clarity on sales volumes growth and Cairn acquisition in the upcoming conference call with the management. We maintain our BUY rating on the stock.
4QFY2011 consolidated result highlights-
· Total sales increased 49.8% yoy to Rs3,624cr above our expectation of Rs2,654cr. Total sales growth was primarily driven by increase in iron ore realisation to US$100, (US$66 in 4QFY2010). Iron ore sales volumes increased to 7.5mn tonnes on wet-metric-tonne basis (7.4mn tonnes in 4QFY2010).
· EBITDA increased 40.9% yoy to Rs2,118cr, however EBITDA margin declined 360bp yoy to 58.5% mainly on account of increase in export duty and raw material costs.
· Other income increased 30.9% yoy to Rs169cr. Consequently, net profit increased 20.5% yoy to Rs1,462cr, above our estimate of Rs1,281cr.
· The company’s total resources and reserves increased to 306mn tonnes as on 31 March 2011(compared to 274 mn tonnes as on 31 March 2010).
· On 19 April 2011, Sesa acquired 200mn shares (10.4% stake ) in Cairn India Limited from Petronas International Corporation at Rs331 per share. Further, Sesa has launched the open offer to acquire upto 20% stake in Cairn India at Rs355 per share.
· During 4QFY2011, Sesa acquired the assets of the partially constructed steel plant unit (0.5mn tonnes) of Bellary Steel for Rs220cr. However, the acquisition has been challenged by JSW Steel in the Supreme Court.
· The company had a cash & equivalents amounting to Rs10,682cr (Rs120 per share) as on 31 March 2011.
Exhibit 1: 4QFY2011- Actual vs. Estimates
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Exhibit 2: 4QFY2011 Performance summary
| (All values in Rs cr) | 4QFY11 | 4QFY10 | YoY% | FY2011 | FY2010 | YoY% |
| Total sales | 3,624 | 2,419 | 49.8 | 9,205 | 5,858 | 57.1 |
| Raw Material | 435 | 186 | 133.3 | 858 | 534 | 60.6 |
| % of Net sales | 12.0 | 7.7 | 9.3 | 9.1 |
| |
| Consumption of Stores | 96 | 69 | 39.4 | 296 | 244 | 21.6 |
| % of Net sales | 2.6 | 2.8 | 3.2 | 4.2 |
| |
| Staff Cost | 67 | 45 | 48.8 | 207 | 169 | 22.5 |
| % of Net sales | 1.8 | 1.8 | 2.2 | 2.9 |
| |
| Export Duty | 365 | 121 | 200.4 | 662 | 148 | 348.6 |
| % of Net sales | 10.1 | 5.0 | 7.2 | 2.5 |
| |
| Other Expenditure | 185 | 509 | (63.7) | 1,680 | 1,642 | 2.3 |
| % of Net sales | 5.1 | 21.1 | 18.3 | 28.0 | 
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