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Sesa Goa; Export duty to impact earnings…
Export duty to impact earnings…
The export duty on iron ore has been hiked to 20% on an ad valorem
basis across all grades in the Union Budget. Earlier it stood at 5% for
fines and 15% for lumps. Additionally, export duty on iron ore pellets
has been removed. We believe Sesa Goa will be largely impacted due to
the aforementioned development as it exports 80% of its volume,
largely constituted by fines. We have revised our target price downward
to | 265 and maintained our REDUCE rating on the stock.
Negative impact on Sesa Goa
Sesa Goa exports 80% of its sales to China. Also, the product mix of Sesa
Goa is more bent towards sales of fines, which constitute 80-85% of its
volumes. As we factor in this increase in export duty, we have revised our
FY12E EBITDA and PAT to | 3207 crore and | 3170 crore, respectively, i.e.
26.0% and 21.6% lower than our previous estimates (EBITDA of | 4369
crore and PAT of |4048 crore).
Outlook & Valuation
Due to a rise in export duty, challenges for Sesa have multiplied.
Moreover, the volume growth concerns us as the company was unable
to ramp up its volumes from Goa operations while the ongoing export
ban in Karnataka is expected to result in muted volumes, going
forward. At the CMP of | 270, the stock is trading at 3.6x FY12E
EV/EBITDA. We have valued the stock at 3.5x its FY12E EV/EBITDA,
thereby arriving at a target price of | 265 with a REDUCE rating.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Sesa Goa; Export duty to impact earnings…
Export duty to impact earnings…
The export duty on iron ore has been hiked to 20% on an ad valorem
basis across all grades in the Union Budget. Earlier it stood at 5% for
fines and 15% for lumps. Additionally, export duty on iron ore pellets
has been removed. We believe Sesa Goa will be largely impacted due to
the aforementioned development as it exports 80% of its volume,
largely constituted by fines. We have revised our target price downward
to | 265 and maintained our REDUCE rating on the stock.
Negative impact on Sesa Goa
Sesa Goa exports 80% of its sales to China. Also, the product mix of Sesa
Goa is more bent towards sales of fines, which constitute 80-85% of its
volumes. As we factor in this increase in export duty, we have revised our
FY12E EBITDA and PAT to | 3207 crore and | 3170 crore, respectively, i.e.
26.0% and 21.6% lower than our previous estimates (EBITDA of | 4369
crore and PAT of |4048 crore).
Outlook & Valuation
Due to a rise in export duty, challenges for Sesa have multiplied.
Moreover, the volume growth concerns us as the company was unable
to ramp up its volumes from Goa operations while the ongoing export
ban in Karnataka is expected to result in muted volumes, going
forward. At the CMP of | 270, the stock is trading at 3.6x FY12E
EV/EBITDA. We have valued the stock at 3.5x its FY12E EV/EBITDA,
thereby arriving at a target price of | 265 with a REDUCE rating.
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