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India Equity Research Reports, IPO and Stock News
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What’s the theme?
We expect Usha Martin to benefit from 32% volume CAGR over FY10-FY12E and an improved cost
structure; expansion of metallics and steel capacities and commencement of captive coal make the company
fully integrated from mineral resources to value-added products. On a consolidated level, we estimate
29% EBITDA CAGR and 26% EPS CAGR over FY10-FY12. Further, FY12E EV/EBITDA of 3.4x adequately
factors-in concerns of disappointing results; the risk-reward seems favorable.
What will move the stock?
1) Sequential improvement in Q4FY11 results, on resumed operation of 30MW captive power; transportation
of captive coal could ease concerns of disappointing results and revive investor confidence; 2) Volume
would grow on higher metallics and billet output from recently-commissioned capacities; and 3) Foreign
subsidiaries are expected to perform better.
Where are we stacked versus consensus?
Our earnings estimates are almost in line with consensus estimates.
What will challenge our target price?
1) Continued under-performance and inability to grow volumes and expand margins despite integrated
operations; 2) Weak recovery in Europe, which contributes >10% to consolidated revenue; 3) Impact on
mining operations either due to regulatory changes or naxalite activities; and 4) Severe decline in steel
profitability.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
What’s the theme?
We expect Usha Martin to benefit from 32% volume CAGR over FY10-FY12E and an improved cost
structure; expansion of metallics and steel capacities and commencement of captive coal make the company
fully integrated from mineral resources to value-added products. On a consolidated level, we estimate
29% EBITDA CAGR and 26% EPS CAGR over FY10-FY12. Further, FY12E EV/EBITDA of 3.4x adequately
factors-in concerns of disappointing results; the risk-reward seems favorable.
What will move the stock?
1) Sequential improvement in Q4FY11 results, on resumed operation of 30MW captive power; transportation
of captive coal could ease concerns of disappointing results and revive investor confidence; 2) Volume
would grow on higher metallics and billet output from recently-commissioned capacities; and 3) Foreign
subsidiaries are expected to perform better.
Where are we stacked versus consensus?
Our earnings estimates are almost in line with consensus estimates.
What will challenge our target price?
1) Continued under-performance and inability to grow volumes and expand margins despite integrated
operations; 2) Weak recovery in Europe, which contributes >10% to consolidated revenue; 3) Impact on
mining operations either due to regulatory changes or naxalite activities; and 4) Severe decline in steel
profitability.
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