Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Bhushan Steel (BSSL.BO)
Neutral Equity Research
Below expectations; lower volumes offset strong realizations in 4Q
What surprised us
Bhushan Steel reported 4QFY11 net income of Rs2.9 bn (+12% yoy, +3%
qoq), 13% below our estimate and 7% below Reuters consensus. FY11 net
income of Rs10.3 bn (+22% yoy) came in 4% below our estimate. In our
view, the miss was driven primarily by lower sales volumes which came in
at 0.425 mn tons for the quarter (-9% qoq, 16% below GS estimate), as
demand slowed down in Feb/March due to sharp price hikes. Average
realizations were strong, up 12% qoq. At the operating level, EBITDA/ton
was robust, at $315/ton in 4Q (vs. GSe of $270/ton, $255 in 3Q). For FY11,
EBITDA/ton expanded to $275/ton vs. $211 in FY10. The company capitalized
around Rs90bn of phase II expansion capex in Mar’11, which would lead to
higher depreciation and interest payments in FY12. Phase III of Orissa
project (2.5mn tons of HRC) is on track for commissioning by Oct 2012. As of
Mar’11, net debt stands at Rs155bn, implying net debt/equity of 3.1X.
What to do with the stock
While we like BSSL’s long-term structural growth outlook driven by
backward integration through Orissa expansion, strong volume growth
(+32% in FY12), and improving EBITDA profile (+41% FY11-13E CAGR), we
believe that higher interest payments/depreciation would keep the ROE
profile muted. We reduce FY12E-FY13E EPS by 1%-7% to account for
higher interest costs and subsequently lower our 12-m P/B-based TP to
Rs445 (from Rs454) on lower book value. The stock is trading at FY12E P/B
of 1.6X (above mid-cycle) with lower-than-mid-cycle returns (FY12E ROE:
20% vs. 5-year historical average of 25%). We maintain Neutral rating.
Upside risks: faster-than-expected capacity ramp-up; downside risks: high
leverage in a rising interest environment and volatile raw material prices
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Bhushan Steel (BSSL.BO)
Neutral Equity Research
Below expectations; lower volumes offset strong realizations in 4Q
What surprised us
Bhushan Steel reported 4QFY11 net income of Rs2.9 bn (+12% yoy, +3%
qoq), 13% below our estimate and 7% below Reuters consensus. FY11 net
income of Rs10.3 bn (+22% yoy) came in 4% below our estimate. In our
view, the miss was driven primarily by lower sales volumes which came in
at 0.425 mn tons for the quarter (-9% qoq, 16% below GS estimate), as
demand slowed down in Feb/March due to sharp price hikes. Average
realizations were strong, up 12% qoq. At the operating level, EBITDA/ton
was robust, at $315/ton in 4Q (vs. GSe of $270/ton, $255 in 3Q). For FY11,
EBITDA/ton expanded to $275/ton vs. $211 in FY10. The company capitalized
around Rs90bn of phase II expansion capex in Mar’11, which would lead to
higher depreciation and interest payments in FY12. Phase III of Orissa
project (2.5mn tons of HRC) is on track for commissioning by Oct 2012. As of
Mar’11, net debt stands at Rs155bn, implying net debt/equity of 3.1X.
What to do with the stock
While we like BSSL’s long-term structural growth outlook driven by
backward integration through Orissa expansion, strong volume growth
(+32% in FY12), and improving EBITDA profile (+41% FY11-13E CAGR), we
believe that higher interest payments/depreciation would keep the ROE
profile muted. We reduce FY12E-FY13E EPS by 1%-7% to account for
higher interest costs and subsequently lower our 12-m P/B-based TP to
Rs445 (from Rs454) on lower book value. The stock is trading at FY12E P/B
of 1.6X (above mid-cycle) with lower-than-mid-cycle returns (FY12E ROE:
20% vs. 5-year historical average of 25%). We maintain Neutral rating.
Upside risks: faster-than-expected capacity ramp-up; downside risks: high
leverage in a rising interest environment and volatile raw material prices
No comments:
Post a Comment