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Usha Martin -Yet another disappointing performance…
Usha Martin (UML) reported subdued numbers for Q3FY11.
Consolidated revenues almost came in line at | 745 crore against our
estimate of | 763 crore (up ~10% QoQ and ~26% YoY). Revenue
growth was primarily led by an improvement in realisations (blended
realisations for Q3FY11 at ~ | 57,777/tonne) across all segments
despite muted volume growth (down ~ 4% QoQ). EBITDA margins
remained under pressure (down ~600 bps both QoQ and YoY) led by
raw material cost push denting margins (up ~26% YoY and ~14%
QoQ). Operational margins were also hit due to a substantial rise in
power & fuel cost (up ~48% YoY) due to power plant shutdown for ~82
days and employee cost (up ~24% YoY) due to higher provisioning. PAT
also got impacted due to higher depreciation (up ~60% YoY) and
interest outgo (up ~35% YoY), thereby leading to a substantial dip in
margins. Going forward, we can expect a stable performance on
account of a 1.2 million pellet plant coming on stream by FY12. This will
lead to an improvement in DRI production post plant optimisation. The
beneficiation plant start-up would improve operational margins to some
extent, thereby improving the ore quality to the furnace.
ƒ Volume growth leads to slippage in performance
Consolidated sales volumes saw a decline of ~4% QoQ led by a
decline in almost all segments viz. ~6% drop in wire rods, ~7%
decline in wire rope volumes and ~16% decline in bright bars
volumes. Going forward, we expect steel production volumes to
improve to ~7,20,000 tonnes in FY12 and ~2,80,000 tonnes in the
value-added segment.
Valuation
At the CMP of | 53, the stock is discounting its FY12E earning by 9.8x
and FY12E EV/EBITDA by 5.6x. Factoring in the present concerns,
despite the growth curve ahead, we continue to value the stock at 4.5x
its FY12 EV/EBITDA and maintain a target price of | 59/share. We have
assigned an ADD rating to the stock.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Usha Martin -Yet another disappointing performance…
Usha Martin (UML) reported subdued numbers for Q3FY11.
Consolidated revenues almost came in line at | 745 crore against our
estimate of | 763 crore (up ~10% QoQ and ~26% YoY). Revenue
growth was primarily led by an improvement in realisations (blended
realisations for Q3FY11 at ~ | 57,777/tonne) across all segments
despite muted volume growth (down ~ 4% QoQ). EBITDA margins
remained under pressure (down ~600 bps both QoQ and YoY) led by
raw material cost push denting margins (up ~26% YoY and ~14%
QoQ). Operational margins were also hit due to a substantial rise in
power & fuel cost (up ~48% YoY) due to power plant shutdown for ~82
days and employee cost (up ~24% YoY) due to higher provisioning. PAT
also got impacted due to higher depreciation (up ~60% YoY) and
interest outgo (up ~35% YoY), thereby leading to a substantial dip in
margins. Going forward, we can expect a stable performance on
account of a 1.2 million pellet plant coming on stream by FY12. This will
lead to an improvement in DRI production post plant optimisation. The
beneficiation plant start-up would improve operational margins to some
extent, thereby improving the ore quality to the furnace.
ƒ Volume growth leads to slippage in performance
Consolidated sales volumes saw a decline of ~4% QoQ led by a
decline in almost all segments viz. ~6% drop in wire rods, ~7%
decline in wire rope volumes and ~16% decline in bright bars
volumes. Going forward, we expect steel production volumes to
improve to ~7,20,000 tonnes in FY12 and ~2,80,000 tonnes in the
value-added segment.
Valuation
At the CMP of | 53, the stock is discounting its FY12E earning by 9.8x
and FY12E EV/EBITDA by 5.6x. Factoring in the present concerns,
despite the growth curve ahead, we continue to value the stock at 4.5x
its FY12 EV/EBITDA and maintain a target price of | 59/share. We have
assigned an ADD rating to the stock.
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