Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Revenues in line with estimates; EBITDA disappoints
Bhushan Steel (BSL) reported revenue growth of 13% Q-o-Q and 36% Y-o-Y, to
INR 19.4 bn. While net realisation was in line with our estimate of INR 41.5k/t,
volumes came ~3.6% above our estimates, resulting in ~3.8% higher revenues
(against estimated). EBITDA/t, at INR 11.5k/t, came in much lower than our
estimate of INR 14.6k/t, primarily on account of higher raw material cost.
Consequently, EBITDA, at INR 5.4 bn (up 10% Q-o-Q and 38% Y-o-Y), was
~18% below estimates. Net profit for the quarter stood at INR 2.8 bn against
our estimate of ~INR 3.6 bn.
Usage of captive HR at 50%; to rise in coming quarters
Backward integration for HR is gathering pace and internal sufficiency has now
reached ~50% in Q3FY11 from ~30% in Q1FY11 and ~45% in Q2FY11. We
expect the same to increase in Q4FY11 and FY12. Management expects a
capacity utilization of 70% in Q4FY11 and 85% in FY12. Moreover, BSL currently
has ~5 months of coking coal inventory, which will assure uninterrupted steel
production from the BF. We expect EBITDA/t to expand to INR 13.3k/t in FY12
even after considering the increase in raw material costs.
Outlook and valuations: Remain positive, maintain ‘BUY’
Though the quarter was slightly subdued against our estimates, we expect
profitability to improve in Q4FY11 as steel price hikes come into play. Moreover,
the company will ramp up its backward integration from current levels of ~50%
both in Q4FY11 (70%) and FY12 (80-85%). Overall, we remain positive on the
expected volume growth, integration process and ongoing expansion (to take
capacity to 5 mtpa by FY13). We, however, trim our EBITDA estimates for FY11
by ~5.0% and for FY12 by ~1.5%, to factor in higher cost of iron ore and coking
coal. However, our PAT/EPS estimates stand upgraded due to lower than
expected capital charges. We maintain ‘BUY/Sector Outperformer’
recommendation/rating on the stock, with a revised price target of INR
490/share.
Company Description
Bhushan Steel (BSL), formerly Bhushan Steel & Strips, is a value added steel
manufacturer catering primarily to the auto/white goods industry. It was established in
1989 and started business at Sahibabad (Uttar Pradesh) with a CR capacity of 120 ktpa.
This plant was gradually scaled up to 475 ktpa by 1997. In 2004, a plant in Khopoli
(Maharashtra) was commissioned with similar configuration BSL is moving towards
becoming an integrated primary steel producer from a secondary player currently. It has
embarked upon a major expansion plan in three phases (in Orissa) to set up feed
facilities of hot metal, sponge iron, slabs, HR and billets for its current product portfolio
of value added products. Phase I (0.3 mtpa) of this expansion was completed in FY09
while phase II (2 mtpa) is nearing completion (end FY10). Work on phase III has already
commenced and will take BSL’s total crude steel capacity to ~5.2 mtpa by end of FY13.
Investment Theme
The expected ramp up of the 2.3 mtpa steel capacity will drive volumes over the next
two years and enable BSL to further strengthen its position in the auto and white goods
sectors. The backward integration facility right up to the metallic stage will give a fillip to
EBITDA margins as dependence on external HR will be eliminated. Moreover, the pure
play exposure to the auto/ white goods industry places BSL in a competitive position as
compared to its peers.
Key Risks
• Delay in ramping up of capacities
• Lack of captive raw material
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Revenues in line with estimates; EBITDA disappoints
Bhushan Steel (BSL) reported revenue growth of 13% Q-o-Q and 36% Y-o-Y, to
INR 19.4 bn. While net realisation was in line with our estimate of INR 41.5k/t,
volumes came ~3.6% above our estimates, resulting in ~3.8% higher revenues
(against estimated). EBITDA/t, at INR 11.5k/t, came in much lower than our
estimate of INR 14.6k/t, primarily on account of higher raw material cost.
Consequently, EBITDA, at INR 5.4 bn (up 10% Q-o-Q and 38% Y-o-Y), was
~18% below estimates. Net profit for the quarter stood at INR 2.8 bn against
our estimate of ~INR 3.6 bn.
Usage of captive HR at 50%; to rise in coming quarters
Backward integration for HR is gathering pace and internal sufficiency has now
reached ~50% in Q3FY11 from ~30% in Q1FY11 and ~45% in Q2FY11. We
expect the same to increase in Q4FY11 and FY12. Management expects a
capacity utilization of 70% in Q4FY11 and 85% in FY12. Moreover, BSL currently
has ~5 months of coking coal inventory, which will assure uninterrupted steel
production from the BF. We expect EBITDA/t to expand to INR 13.3k/t in FY12
even after considering the increase in raw material costs.
Outlook and valuations: Remain positive, maintain ‘BUY’
Though the quarter was slightly subdued against our estimates, we expect
profitability to improve in Q4FY11 as steel price hikes come into play. Moreover,
the company will ramp up its backward integration from current levels of ~50%
both in Q4FY11 (70%) and FY12 (80-85%). Overall, we remain positive on the
expected volume growth, integration process and ongoing expansion (to take
capacity to 5 mtpa by FY13). We, however, trim our EBITDA estimates for FY11
by ~5.0% and for FY12 by ~1.5%, to factor in higher cost of iron ore and coking
coal. However, our PAT/EPS estimates stand upgraded due to lower than
expected capital charges. We maintain ‘BUY/Sector Outperformer’
recommendation/rating on the stock, with a revised price target of INR
490/share.
Company Description
Bhushan Steel (BSL), formerly Bhushan Steel & Strips, is a value added steel
manufacturer catering primarily to the auto/white goods industry. It was established in
1989 and started business at Sahibabad (Uttar Pradesh) with a CR capacity of 120 ktpa.
This plant was gradually scaled up to 475 ktpa by 1997. In 2004, a plant in Khopoli
(Maharashtra) was commissioned with similar configuration BSL is moving towards
becoming an integrated primary steel producer from a secondary player currently. It has
embarked upon a major expansion plan in three phases (in Orissa) to set up feed
facilities of hot metal, sponge iron, slabs, HR and billets for its current product portfolio
of value added products. Phase I (0.3 mtpa) of this expansion was completed in FY09
while phase II (2 mtpa) is nearing completion (end FY10). Work on phase III has already
commenced and will take BSL’s total crude steel capacity to ~5.2 mtpa by end of FY13.
Investment Theme
The expected ramp up of the 2.3 mtpa steel capacity will drive volumes over the next
two years and enable BSL to further strengthen its position in the auto and white goods
sectors. The backward integration facility right up to the metallic stage will give a fillip to
EBITDA margins as dependence on external HR will be eliminated. Moreover, the pure
play exposure to the auto/ white goods industry places BSL in a competitive position as
compared to its peers.
Key Risks
• Delay in ramping up of capacities
• Lack of captive raw material
No comments:
Post a Comment