Bhushan Steel High leverage to weigh on operating performance HOLD ::Emkay

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Bhushan Steel

High leverage to weigh on operating performance

HOLD

CMP: Rs 445                                       Target Price: Rs 454

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n     Bhushan Steel reported a topline of Rs 19.7 bn for Q4FY11, up 22% YoY and flat QoQ. Sales volume declined by 9% QoQ despite rising 8% YoY

n     Fall in raw material costs as a percentage to revenues helped EBITDA to grow 43% YoY and 12% QoQ to Rs 6 bn. EBITDA margins also improved 458 bps YoY and 297 bps to 30.6%      

n     Despite good operating performance, higher depreciation, interest costs and tax rate kept the PAT restricted at Rs 2.9 bn, up 19% YoY and 3% QoQ    

n     Our EPS estimates for FY12E and FY13E stand at Rs 54.1 and Rs 55 respectively. We are resuming our coverage on the company with a target price of Rs 454; Hold