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Sailing in rough weather…
SAIL’s Q4Y11 results came below our estimates. Sales came in at |
12,166 crore against the expected | 13021 crore (marginal decline of
~0.5% YoY and ~7.5% QoQ). This was mainly on the back of lower sales
volumes of 3.14 million tonnes (MT), which was down ~7.6% YoY and
~4.8% QoQ. EBITDA margins remained under pressure (down ~ 610 bps
YoY whereas sequentially they improved ~340 bps). This was due to
higher raw material costs, largely contributed by coking coal prices that
increased ~73% YoY, followed by an increase in staff cost and higher
royalty on iron ore. Net profit stood at | 1507 crore as against our
expectation of | 1728 crore. The PAT margin improved ~260 bps QoQ
whereas it declined ~470 bps as compared to the similar period last year.
We believe higher coking coal prices will continue to weigh on the
operating performance of the company, going forward. Also, we expect
volumes to remain muted especially from the flat segment (which
contributes 60% to total sales volume) where demand slowdown is
expected. We have revised our target price to | 161 per share taking into
consideration the above-mentioned factors.
Improved realisations lead to higher EBITDA/tonne sequentially
Overall blended realisations improved to ~| 38700/tonne as
compared to ~| 34200/tonne in Q3FY11, thereby leading to an
improvement in EBITDA/tonne in Q4FY11 to ~| 7453/tonne from |
5400/tonne in Q3FY11. However, on a YoY basis, the EBITDA/ tonne
was still lower ~18% (in Q4FY10 it stood at ~| 9100/tonne).
Valuation
At the CMP of | 156, the stock is trading at FY12E PE of 14.1x and FY12E
EV/EBITDA of 8.6x. Factoring in the concerns on higher raw material
prices and higher wage cost, we have valued the stock at 5.5x EV/EBITDA
rolling over FY13E to arrive at a target price of | 161. We have assigned a
HOLD rating to the stock.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Sailing in rough weather…
SAIL’s Q4Y11 results came below our estimates. Sales came in at |
12,166 crore against the expected | 13021 crore (marginal decline of
~0.5% YoY and ~7.5% QoQ). This was mainly on the back of lower sales
volumes of 3.14 million tonnes (MT), which was down ~7.6% YoY and
~4.8% QoQ. EBITDA margins remained under pressure (down ~ 610 bps
YoY whereas sequentially they improved ~340 bps). This was due to
higher raw material costs, largely contributed by coking coal prices that
increased ~73% YoY, followed by an increase in staff cost and higher
royalty on iron ore. Net profit stood at | 1507 crore as against our
expectation of | 1728 crore. The PAT margin improved ~260 bps QoQ
whereas it declined ~470 bps as compared to the similar period last year.
We believe higher coking coal prices will continue to weigh on the
operating performance of the company, going forward. Also, we expect
volumes to remain muted especially from the flat segment (which
contributes 60% to total sales volume) where demand slowdown is
expected. We have revised our target price to | 161 per share taking into
consideration the above-mentioned factors.
Improved realisations lead to higher EBITDA/tonne sequentially
Overall blended realisations improved to ~| 38700/tonne as
compared to ~| 34200/tonne in Q3FY11, thereby leading to an
improvement in EBITDA/tonne in Q4FY11 to ~| 7453/tonne from |
5400/tonne in Q3FY11. However, on a YoY basis, the EBITDA/ tonne
was still lower ~18% (in Q4FY10 it stood at ~| 9100/tonne).
Valuation
At the CMP of | 156, the stock is trading at FY12E PE of 14.1x and FY12E
EV/EBITDA of 8.6x. Factoring in the concerns on higher raw material
prices and higher wage cost, we have valued the stock at 5.5x EV/EBITDA
rolling over FY13E to arrive at a target price of | 161. We have assigned a
HOLD rating to the stock.
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