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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.
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. 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.
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. 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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