Dear All,
Forwarding you the Result Update on Steel Authority of India for 4QFY2011 with a Buy recommendation and a Target Price of `191 (12 months).
SAIL reported net sales of `11,945cr, below our estimate of `13,307cr for 4QFY2011. However, net profit at `1,507cr was slightly below our estimate of `1,566cr. Lower-than-expected sales volume led to deviation in the top line.
Lower sales volume – A negative surprise: SAIL’s 4QFY2011 sales volume declined by 3.5% qoq and 7.8% yoy to 3.1mn tonnes, while higher realisation (up 11.1% qoq and 8.4% yoy to `38,101/tonne) led to 7.2% qoq growth in the top line to `11,945cr, though flat yoy. Despite higher realisation, EBITDA/tonne declined by 21.4% yoy to US$156; however, up 26.5% qoq. This was due to higher coking coal and staff costs. Consequently, EBITDA margin contracted by 740bp yoy to 18.5%; however, up 239bp sequentially. As a result, EBITDA declined by 28.6% yoy to `2,211cr (up 23.1% qoq). Further, net interest income declined by 13.5% yoy (up 18.8% qoq) to `239cr and depreciation increased by 13.9% yoy to `386cr (flat qoq), which resulted in a 27.7% yoy decline in net profit to `1,507cr (up 36.1% qoq).
Outlook and valuation: At the CMP, the stock is trading at 8.5x FY2012E and 6.8x FY2013E EV/EBITDA, respectively. Going ahead, SAIL is expected to increase its saleable steel production capacity from 12.5mn tonnes to 23.1mn tonnes by FY2015. With captive iron ore backing the upcoming steel expansion, we expect strong profitability from these plants. Hence, we upgrade our rating to Buy from Accumulate with a revised target price of `191 (`195).
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: 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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