Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Volume and realisations below expectation
Usha Martin (UML) reported Q3FY11 consolidated net revenue of INR 7.5 bn,
below our expectation of INR 7.9 bn, partly due to low sales volume at
standalone level of 117 kt (our estimate: 123 kt). Blended realisations, at INR
52,200/t, were also below our estimates. Billet production is down 13% Q-o-Q,
due to breakdown in 30 MW CPP and inadequate power supply from JSEB; the
CPP has resumed operations post repairs last month.
Higher costs adversely impact EBITDA
Consolidated EBITDA, at INR 1.18 bn (down 10% Y-o-Y and 26% Q-o-Q), was
significantly below our estimate of INR 1.65 bn. Q-o-Q, raw material cost/t has
gone up 21%, much higher than anticipated. Other expense is also up 19% Q-o-
Q, due to absence of forex gains booked in Q2FY11. Coal supply from captive
mine was adversely affected during the quarter due to non-availability of the
required trucks. The company now has largely resolved the issue by adding new
transporters, but coal cost has gone by INR 300/t. PAT came in at INR 131 mn
(down 62% Y-o-Y and 80% Q-o-Q), hit by higher-than-expected interest cost
and depreciation.
Financial closure achieved for INR 12 bn capex
The company has achieved financial closure for the INR 12 bn capex plan and
has spent INR 1.2 bn till date. It has guided for INR 6 bn and INR 4 bn capex for
this project in FY12 and FY13, respectively. The 200 kt DRI and 30 MW CPP are
expected to come on stream by December 2011. 0.4 mt coke oven and second
unit 30 MW CPP is expected to be operational by September 2012, while pellet
plant is likely to be completed by December 2012.
Outlook and valuations: Current quarter to be crucial; maintain ‘BUY’
Management expects profitability to improve significantly in Q4FY11, with CPP
operating smoothly, billet production rising to 150-160 kt, coal supply restored
and price hikes of ~INR 3,500/t. We, therefore, retain our FY11 and FY12
EBITDA, but cut EPS by 10.5% for FY11 and 8.5% for FY12 to account for higher
capital charges. We introduce FY13 estimates in this update, and retain
‘BUY/Sector Performer’ on the stock.
Key points
• Supply from captive coal mine was ~60 kt during the quarter against targeted supply
of 140-150 kt. The company bought 95 kt coal from open market at INR 3,400/t.
• Consolidated gross debt is INR 22 bn currently. Management expects debt to increase
to INR 25-26 bn in FY12, considering the proposed capex. Average cost of debt has
gone up to 7.9% due to interest rate hardening.
• Volume guidance for FY12 was 720kt (our assumption is 700kt).
• Capex guidance for FY11, FY12 and FY13 is INR 4.5 bn, INR 6 bn and INR 4 bn,
respectively.
• Management has undertaken price hike of ~INR 3,500/t since last month. It is
contemplating INR 1,000/t price hikes in February and March.
• Iron ore fines inventory is 2 mtpa.
Company Description
UML is India’s largest and the world’s second-largest manufacturer of steel wire ropes. It
is engaged in the manufacture of steel wire rods, wires, wire ropes, and other related
products with a steel capacity of 0.4 mt. It is a global company with a presence, through
either manufacturing or sales and marketing, in over 13 countries. In India, its
manufacturing facilities are located near Ranchi and Jamshedpur in Jharkhand and
Hoshiarpur in Punjab. The company has various overseas subsidiaries, with
manufacturing facilities located at Bangkok (Thailand), Dubai (UAE), and Worksop (UK).
It set up a wire rope manufacturing plant in the US through its subsidiary Brunton Shaw
Americas. UML also has a wide marketing and distribution network in India, Singapore,
USA, Scandinavia, the UK, Dubai, and South Africa.
Investment Theme
UML enjoys 70% market share in the global wire ropes industry catering to high-end oil
offshore services. It has a wide product portfolio and operates across all levels of the
value chain and manufactures sponge iron, pig iron, billets, rolled products, wire rods
and bars, wires, strands, and wire ropes. It has a significant presence in value-added
products such as conveyor cords, specialty steel, and bright bars. UML is the sole
company in the world to manufacture wire ropes from the mineral stage. The company is
100% captive for its iron ore requirement. The capacity expansion plan completed by the
company will lead to volume growth (capacity increase from 0.4 mt to 0.9 mt)and
further enrich the product mix. Increased metallics capacity (from 0.3 mt to 0.9 mt) and
captive coal mining in will reduce costs.
Key Risks
• Delay in ramp up/completion of expansion projects.
• Lower than expected volume growth.
• Disruption in captive power, iron ore and thermal coal supply.
• Lower than expected realizations.
India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details �� ��
Volume and realisations below expectation
Usha Martin (UML) reported Q3FY11 consolidated net revenue of INR 7.5 bn,
below our expectation of INR 7.9 bn, partly due to low sales volume at
standalone level of 117 kt (our estimate: 123 kt). Blended realisations, at INR
52,200/t, were also below our estimates. Billet production is down 13% Q-o-Q,
due to breakdown in 30 MW CPP and inadequate power supply from JSEB; the
CPP has resumed operations post repairs last month.
Higher costs adversely impact EBITDA
Consolidated EBITDA, at INR 1.18 bn (down 10% Y-o-Y and 26% Q-o-Q), was
significantly below our estimate of INR 1.65 bn. Q-o-Q, raw material cost/t has
gone up 21%, much higher than anticipated. Other expense is also up 19% Q-o-
Q, due to absence of forex gains booked in Q2FY11. Coal supply from captive
mine was adversely affected during the quarter due to non-availability of the
required trucks. The company now has largely resolved the issue by adding new
transporters, but coal cost has gone by INR 300/t. PAT came in at INR 131 mn
(down 62% Y-o-Y and 80% Q-o-Q), hit by higher-than-expected interest cost
and depreciation.
Financial closure achieved for INR 12 bn capex
The company has achieved financial closure for the INR 12 bn capex plan and
has spent INR 1.2 bn till date. It has guided for INR 6 bn and INR 4 bn capex for
this project in FY12 and FY13, respectively. The 200 kt DRI and 30 MW CPP are
expected to come on stream by December 2011. 0.4 mt coke oven and second
unit 30 MW CPP is expected to be operational by September 2012, while pellet
plant is likely to be completed by December 2012.
Outlook and valuations: Current quarter to be crucial; maintain ‘BUY’
Management expects profitability to improve significantly in Q4FY11, with CPP
operating smoothly, billet production rising to 150-160 kt, coal supply restored
and price hikes of ~INR 3,500/t. We, therefore, retain our FY11 and FY12
EBITDA, but cut EPS by 10.5% for FY11 and 8.5% for FY12 to account for higher
capital charges. We introduce FY13 estimates in this update, and retain
‘BUY/Sector Performer’ on the stock.
Key points
• Supply from captive coal mine was ~60 kt during the quarter against targeted supply
of 140-150 kt. The company bought 95 kt coal from open market at INR 3,400/t.
• Consolidated gross debt is INR 22 bn currently. Management expects debt to increase
to INR 25-26 bn in FY12, considering the proposed capex. Average cost of debt has
gone up to 7.9% due to interest rate hardening.
• Volume guidance for FY12 was 720kt (our assumption is 700kt).
• Capex guidance for FY11, FY12 and FY13 is INR 4.5 bn, INR 6 bn and INR 4 bn,
respectively.
• Management has undertaken price hike of ~INR 3,500/t since last month. It is
contemplating INR 1,000/t price hikes in February and March.
• Iron ore fines inventory is 2 mtpa.
Company Description
UML is India’s largest and the world’s second-largest manufacturer of steel wire ropes. It
is engaged in the manufacture of steel wire rods, wires, wire ropes, and other related
products with a steel capacity of 0.4 mt. It is a global company with a presence, through
either manufacturing or sales and marketing, in over 13 countries. In India, its
manufacturing facilities are located near Ranchi and Jamshedpur in Jharkhand and
Hoshiarpur in Punjab. The company has various overseas subsidiaries, with
manufacturing facilities located at Bangkok (Thailand), Dubai (UAE), and Worksop (UK).
It set up a wire rope manufacturing plant in the US through its subsidiary Brunton Shaw
Americas. UML also has a wide marketing and distribution network in India, Singapore,
USA, Scandinavia, the UK, Dubai, and South Africa.
Investment Theme
UML enjoys 70% market share in the global wire ropes industry catering to high-end oil
offshore services. It has a wide product portfolio and operates across all levels of the
value chain and manufactures sponge iron, pig iron, billets, rolled products, wire rods
and bars, wires, strands, and wire ropes. It has a significant presence in value-added
products such as conveyor cords, specialty steel, and bright bars. UML is the sole
company in the world to manufacture wire ropes from the mineral stage. The company is
100% captive for its iron ore requirement. The capacity expansion plan completed by the
company will lead to volume growth (capacity increase from 0.4 mt to 0.9 mt)and
further enrich the product mix. Increased metallics capacity (from 0.3 mt to 0.9 mt) and
captive coal mining in will reduce costs.
Key Risks
• Delay in ramp up/completion of expansion projects.
• Lower than expected volume growth.
• Disruption in captive power, iron ore and thermal coal supply.
• Lower than expected realizations.
No comments:
Post a Comment