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Sesa Goa Limited
4Q: Operating results in line,
PAT lower on higher taxes
„4Q EBITDA in line; PAT lower on higher tax; Underperform
PAT grew 37%YoY to Rs14.6bn vs. our est. of Rs17.8bn. 4Q EBITDA was in line
at Rs21.2bn, but higher tax rate led to lower PAT. While volumes were stronger
EBITDA was in line due to higher costs. We tweak our FY12E EPS by 3% as we
marginally lift our volume & cost est. Final order by Apex Court regarding export
ban is awaited in early May. We expect the ban to be lifted. Spot prices are near
peak and are likely to ease in 2HCY as supply improves, in our view. We remain
cautious as we expect volume/regulatory headwinds to persist as Goa mine
approvals are on hold and as shipments are constrained by transport restrictions.
Volumes stronger, but offset by higher costs
Iron ore EBITDA/t was US$60/t (3Q US$48/t) vs. our est. of US$69/t. ASP grew
21% to US$103/t as expected, but cost/t jumped 15%QoQ led by higher export
tax, royalty & logistics cost (in Goa). Volumes grew 1% YoY to 7.5mt (WMT) vs.
our 6.6mt est. This was creditable given export ban. Tax rate was 35% (19% in
3Q) as Sesa was unable to claim EOU benefits in FY11 due to Karnataka ban.
Mine life extension a positive, but already in our NPV
Sesa’s net reserve & resources (R&R) has increased to 306mt from 274mt (FY10,
ex Orissa) led by R&R upgrade of 32mt (net). This implies mine life of 9 yrs (+1.3
yrs) based on our long term vols. est. (15 yrs based on FY11 vols.) Our valuation
is unchanged as we have already factored in R&R accretion of 80mt in our est.
Volume growth guidance of 15-20% in FY12e
Sesa expects FY12 growth to be led by Karnataka, though this hinges on export
ban removal. Goa volumes are capped near term at ~15.6mt (wmt) due to
logistics issues. Sesa has to export ~8mt (wmt) from Karnataka to meet its target.
As per Sesa State Govt. is not yet issuing permits despite exports being allowed.
According to press reports State Govt. may start issuing permits next week.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Sesa Goa Limited
4Q: Operating results in line,
PAT lower on higher taxes
„4Q EBITDA in line; PAT lower on higher tax; Underperform
PAT grew 37%YoY to Rs14.6bn vs. our est. of Rs17.8bn. 4Q EBITDA was in line
at Rs21.2bn, but higher tax rate led to lower PAT. While volumes were stronger
EBITDA was in line due to higher costs. We tweak our FY12E EPS by 3% as we
marginally lift our volume & cost est. Final order by Apex Court regarding export
ban is awaited in early May. We expect the ban to be lifted. Spot prices are near
peak and are likely to ease in 2HCY as supply improves, in our view. We remain
cautious as we expect volume/regulatory headwinds to persist as Goa mine
approvals are on hold and as shipments are constrained by transport restrictions.
Volumes stronger, but offset by higher costs
Iron ore EBITDA/t was US$60/t (3Q US$48/t) vs. our est. of US$69/t. ASP grew
21% to US$103/t as expected, but cost/t jumped 15%QoQ led by higher export
tax, royalty & logistics cost (in Goa). Volumes grew 1% YoY to 7.5mt (WMT) vs.
our 6.6mt est. This was creditable given export ban. Tax rate was 35% (19% in
3Q) as Sesa was unable to claim EOU benefits in FY11 due to Karnataka ban.
Mine life extension a positive, but already in our NPV
Sesa’s net reserve & resources (R&R) has increased to 306mt from 274mt (FY10,
ex Orissa) led by R&R upgrade of 32mt (net). This implies mine life of 9 yrs (+1.3
yrs) based on our long term vols. est. (15 yrs based on FY11 vols.) Our valuation
is unchanged as we have already factored in R&R accretion of 80mt in our est.
Volume growth guidance of 15-20% in FY12e
Sesa expects FY12 growth to be led by Karnataka, though this hinges on export
ban removal. Goa volumes are capped near term at ~15.6mt (wmt) due to
logistics issues. Sesa has to export ~8mt (wmt) from Karnataka to meet its target.
As per Sesa State Govt. is not yet issuing permits despite exports being allowed.
According to press reports State Govt. may start issuing permits next week.
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