Dear All,
Forwarding you the Result Update on Sesa Goa for 4QFY2011 with a Buy recommendation and a Target Price of `385 (12 months).
Sesa Goa’s 4QFY2011 net sales at `3,624cr were ahead of our estimate of `2,654cr on account of higher-than-expected iron ore realisation. Net profit at `1,462cr was also above our estimate of `1,281cr.
Top-line growth aided by higher realisation: Despite lower production during 4QFY2011 due to export ban in Karnataka and termination of third-party mining in Orissa, sales volume grew marginally by 1.7% yoy to 7.5mn tonnes (wmt basis). However, higher iron ore realisation led to 49.8% yoy growth in the top line to `3,624 in 4QFY2011. During the quarter, iron ore realisation increased by 52.2% to US$100/tonne. On the operating front, EBITDA grew by 40.9% yoy to `2,118cr. However, EBITDA margin contracted by 368bp to 58.5% yoy as the positive impact of higher realisation was offset by increased royalty rates and higher export duty and freight cost. Other income grew by 30.9% yoy to `169cr, but tax rate increased by 34.7%, leading to only a 20.5% yoy increase in the bottom line to `1,462cr.
Outlook and valuation: Sesa Goa’s reserves and resources (R&R) continue to increase annually on account of its exploration activities. The company reported an increase in its R&R to 306mn tonnes as of March 31, 2011 (274mn tonnes as of March 31, 2010), indicating a mine life of over 14 years based on FY2011 production. We believe the current stock price discounts negatives such as acquisition of minority stake in unrelated oil business via Cairn India’s stake acquisition, increased export duty and railway freight and muted volume growth from Goa mines. Sesa Goa is currently trading at 3.2x FY2012E and 2.3x FY2013E EV/EBITDA. On a P/BV basis, the stock is trading at 1.7x FY2012 and 1.4x FY2013 estimates. We maintain our Buy rating on Sesa Goa and raise our target price to `385 (`382), valuing the stock at 3.3x EV/EBITDA.
Kindly click on the following link to view the Report.
If you have any further queries, feel free to call us on 022 39357600, Extn: 6864 / 6865 or mail us at advisory@angelbroking.com
With best regards,
Fundamental Advisory Desk
Angel Broking
Akruti Star,6th Floor, Road No.7,MIDC, Andheri (E),Mumbai – 93.
Call : (91) (022) 39357600 Ext. 6864,6865
Website : www.angelbroking.com
Disclaimer: Ours is an advisory role. The final decision and consequences based on our information is solely yours. Moreover, in keeping with regulatory guidelines, we do not guarantee any returns on investments. Prospective investors and others are cautioned that any forward-looking statements are not predictions and may be subject to change without notice.
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