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Supreme Court lifts ban on iron ore exports: The Supreme Court has lifted the
ban on iron ore exports from Karnataka, effective April 20, 2011. In July 2010,
the Karnataka Government had banned iron ore shipments from 10 ports and
stopped transport of iron ore to other ports for exports to curb illegal mining.
Raise Sesa Goa’s volume estimates for FY2012: During 2QFY2011, Sesa Goa
had curbed its iron ore mining in Karnataka post the state government’s ban on
iron ore exports, as the company’s iron ore realisations were significantly lower in
the domestic market compared to the international market. However, in lieu of
the Supreme Court’s order, we expect Sesa Goa to ramp up production from its
Karnataka mines. Thus, we raise our FY2012 iron ore production and sales
volume estimates for Sesa Goa by nearly 3.5mn tonnes.
Outlook and valuation: We expect Sesa Goa’s iron ore sales volume to increase
by 18.0% yoy in FY2012 and 10.0% yoy in FY2013 on account of production
ramp up from its Karnataka mines. Accordingly, we also raise our profitability
estimates for FY2012 and FY2013. Meanwhile, international spot iron ore prices
have increased significantly in the past six months due to improved demand from
China. Freight rates on iron ore exports have also increased recently. However,
we believe higher iron ore prices will offset the rise in expenses. Further,
lumpiness in iron ore demand, huge swings in iron ore prices, logistical issues in
Goa and stricter regulations imposed by governments are the key concerns for
Sesa Goa in the near-to-medium term. At current levels, the stock is trading at
3.0x FY2012E and 2.0x FY2013E EV/EBITDA. On P/BV basis, the stock is
available at 1.7x FY2012 and 1.4x FY2013 estimates. We maintain our Buy
rating on the stock with a revised target price of `382 (`336), valuing the stock at
3.0x FY2013E EV/EBITDA.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Supreme Court lifts ban on iron ore exports: The Supreme Court has lifted the
ban on iron ore exports from Karnataka, effective April 20, 2011. In July 2010,
the Karnataka Government had banned iron ore shipments from 10 ports and
stopped transport of iron ore to other ports for exports to curb illegal mining.
Raise Sesa Goa’s volume estimates for FY2012: During 2QFY2011, Sesa Goa
had curbed its iron ore mining in Karnataka post the state government’s ban on
iron ore exports, as the company’s iron ore realisations were significantly lower in
the domestic market compared to the international market. However, in lieu of
the Supreme Court’s order, we expect Sesa Goa to ramp up production from its
Karnataka mines. Thus, we raise our FY2012 iron ore production and sales
volume estimates for Sesa Goa by nearly 3.5mn tonnes.
Outlook and valuation: We expect Sesa Goa’s iron ore sales volume to increase
by 18.0% yoy in FY2012 and 10.0% yoy in FY2013 on account of production
ramp up from its Karnataka mines. Accordingly, we also raise our profitability
estimates for FY2012 and FY2013. Meanwhile, international spot iron ore prices
have increased significantly in the past six months due to improved demand from
China. Freight rates on iron ore exports have also increased recently. However,
we believe higher iron ore prices will offset the rise in expenses. Further,
lumpiness in iron ore demand, huge swings in iron ore prices, logistical issues in
Goa and stricter regulations imposed by governments are the key concerns for
Sesa Goa in the near-to-medium term. At current levels, the stock is trading at
3.0x FY2012E and 2.0x FY2013E EV/EBITDA. On P/BV basis, the stock is
available at 1.7x FY2012 and 1.4x FY2013 estimates. We maintain our Buy
rating on the stock with a revised target price of `382 (`336), valuing the stock at
3.0x FY2013E EV/EBITDA.
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