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Metals
EBITDA/tonne to be lower on the back of higher raw material cost
We expect steel companies within our coverage universe to report a
muted set of numbers for Q1FY12 on the back of higher raw
material costs and subdued demand. On the back of supply side
constraints, sequentially there was a sharp rise in the prices of key
raw materials such as coking coal (higher by 46.7% QoQ).
Furthermore, muted growth in steel demand led to a marginal
decline in steel prices. As a result, for Q1FY12 we expect EBITDA
per tonne of steel companies to decline in the range of | 1500- 2500
per tonne QoQ. Going forward, we expect EBITDA margins of steel
players to remain under pressure as the prices of key inputs is
expected to remain firm due to supply side bottlenecks.
Non-ferrous companies to perform well YoY
All base metals prices were significantly higher in Q1FY12 as
compared to Q1FY11, driven mainly by strong demand and liquidity
in the global market. LME prices of Copper, Aluminium and Lead
registered a healthy growth of ~31% ~24% and ~31% YoY
respectively, whereas Zinc prices grew modestly by ~11% YoY. In
our coverage, we expect Hindustan Zinc and Sterlite Industries to
post a good set of numbers driven by higher volumes, improved
realisations on the LME for zinc, lead & copper, higher TC/RC
margins and improvement in by-product realisation viz., sulphuric
acid, phosphoric acid and silver.
EBITDA margins to take a hit QoQ
In Q1FY12E, we expect the EBITDA of the I-direct coverage universe
to decline by 23.8% QoQ mainly on the back of higher operating
costs. EBITDA margins will decline by 310 bps QoQ to 19.1%. We
expect PAT for the I-direct coverage universe to decline by 25.6% to
| 8777.9 crore.
Company specific view
Company Remarks
Adhunik We expect overall sales growth of ~15% on the back of higher realisations and
marginally higher sales volumes(up by 2.5%) to ~89600. At OMML, iron ore volumes
are expected at 0.3MT whereas manganese ore volumes at 0.05 MT. Lower
realisation on manganese ore (dip of 20%) will lead flattish performance at OMML.
Graphite
India
In Q1FY12, on a YoY basis, we expect ~20% growth in sales volume of graphite
electrodes primarily on the back of muted volumes in Q1FY11. However, the EBITDA
margin is expected to decline 370 bps YoY to 19.3% on the back of higher operating
costs
HEG During Q1FY12E, the capacity utilisation level of the graphite electrodes segment is
expected to be ~80% while realisations are expected to remain stable QoQ. PAT is
expected to increase ~17.5% YoY on account of the lower base effect
Hindustan
Zinc
Refined zinc sales is expected at ~190,000 tonnes (up ~16% YoY) while refined lead
sales are expected at ~15,100 tonne, up ~10% YoY. Silver production for Q1FY12E is
estimated at ~ 81250 kg(up by 185% YoY). We expect overall performance to
improve on the back of higher volumes & better realisation.
JSW Steel We expect JSW Steel to post sales volume of ~1.7 MT in Q1FY12 flattish on a
sequential basis. However on the back of higher raw material cost, the EBITDA
margin is expected to decline by 590 bps YoY & 650 bps QoQ to 16.3%. As a result the
EBITDA is expected to decline by 31.6% QoQ .
SAIL The topline is expected to increase by 25% YoY primarily on the back of higher sales
volume. The sales volume is expected to be ~3.2 MT in Q1FY12 as compared to 2.3
MT in Q1FY11. However, on account of higher coking coal, cost EBITDA margin is
expected to decline by 320 bps QoQ and 420 bps YoY to 16.0%
Sesa Goa Sales volumes for Q1FY12E are expected to decline ~31% QoQ and decline ~34%
YoY. We expect a dip in the volumes due to no contribution from Karnataka. However,
the improvement in topline is expected on the back of better realisations, which is
expected improved from $90 in Q1FY11 to ~$107 in Q1FY12E.
Sterlite
Industries
The topline is expected to grow ~63% YoY on the back of higher performance from
the domestic and international zinc business. We expect EBITDA margins to improve
by 280 bps to 25.3% as compared to 22.5%in Q1FY11. PAT is expected to post growth
of ~5.7% YoY on the back of higher interest and depreciation cost
Tata Steel Consolidated sales volumes for Q1FY12E are expected to grow ~3% YoY but decline
~6% QoQ to 6.22 MT. Blended EBITDA margins are expected to decline by 180 bps
QoQ to 11.4% on the back of higher operating costs. We expect PAT to increase
sharply due to one-time gain on stake sale in Riversdale
Usha Martin The topline for Q1FY12 is expected to increase ~17.9% YoY but decline by ~7.7%
QoQ. However, on the back of higher coking coal costs the EBITDA margin is
expected to decline by 420 bps YoY to 17.2%. PAT is expected to decline ~33% YoY
on account of higher depreciation and interest cost
Visa Steel We expect overall sales volumes in Q1FY12E to grow ~48% YoY, we expect
significant contribution coming from sales of pig iron(~36,000), which was lower in
Q1FY11 at ~533 tonnes. EBITDA for Q1FY12 will improved ~20% YoY but
sequentially it is likly to be lower by 32% on the back of higher input cost
Source: Company, ICICIdirect.com Research
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Metals
EBITDA/tonne to be lower on the back of higher raw material cost
We expect steel companies within our coverage universe to report a
muted set of numbers for Q1FY12 on the back of higher raw
material costs and subdued demand. On the back of supply side
constraints, sequentially there was a sharp rise in the prices of key
raw materials such as coking coal (higher by 46.7% QoQ).
Furthermore, muted growth in steel demand led to a marginal
decline in steel prices. As a result, for Q1FY12 we expect EBITDA
per tonne of steel companies to decline in the range of | 1500- 2500
per tonne QoQ. Going forward, we expect EBITDA margins of steel
players to remain under pressure as the prices of key inputs is
expected to remain firm due to supply side bottlenecks.
Non-ferrous companies to perform well YoY
All base metals prices were significantly higher in Q1FY12 as
compared to Q1FY11, driven mainly by strong demand and liquidity
in the global market. LME prices of Copper, Aluminium and Lead
registered a healthy growth of ~31% ~24% and ~31% YoY
respectively, whereas Zinc prices grew modestly by ~11% YoY. In
our coverage, we expect Hindustan Zinc and Sterlite Industries to
post a good set of numbers driven by higher volumes, improved
realisations on the LME for zinc, lead & copper, higher TC/RC
margins and improvement in by-product realisation viz., sulphuric
acid, phosphoric acid and silver.
EBITDA margins to take a hit QoQ
In Q1FY12E, we expect the EBITDA of the I-direct coverage universe
to decline by 23.8% QoQ mainly on the back of higher operating
costs. EBITDA margins will decline by 310 bps QoQ to 19.1%. We
expect PAT for the I-direct coverage universe to decline by 25.6% to
| 8777.9 crore.
Company specific view
Company Remarks
Adhunik We expect overall sales growth of ~15% on the back of higher realisations and
marginally higher sales volumes(up by 2.5%) to ~89600. At OMML, iron ore volumes
are expected at 0.3MT whereas manganese ore volumes at 0.05 MT. Lower
realisation on manganese ore (dip of 20%) will lead flattish performance at OMML.
Graphite
India
In Q1FY12, on a YoY basis, we expect ~20% growth in sales volume of graphite
electrodes primarily on the back of muted volumes in Q1FY11. However, the EBITDA
margin is expected to decline 370 bps YoY to 19.3% on the back of higher operating
costs
HEG During Q1FY12E, the capacity utilisation level of the graphite electrodes segment is
expected to be ~80% while realisations are expected to remain stable QoQ. PAT is
expected to increase ~17.5% YoY on account of the lower base effect
Hindustan
Zinc
Refined zinc sales is expected at ~190,000 tonnes (up ~16% YoY) while refined lead
sales are expected at ~15,100 tonne, up ~10% YoY. Silver production for Q1FY12E is
estimated at ~ 81250 kg(up by 185% YoY). We expect overall performance to
improve on the back of higher volumes & better realisation.
JSW Steel We expect JSW Steel to post sales volume of ~1.7 MT in Q1FY12 flattish on a
sequential basis. However on the back of higher raw material cost, the EBITDA
margin is expected to decline by 590 bps YoY & 650 bps QoQ to 16.3%. As a result the
EBITDA is expected to decline by 31.6% QoQ .
SAIL The topline is expected to increase by 25% YoY primarily on the back of higher sales
volume. The sales volume is expected to be ~3.2 MT in Q1FY12 as compared to 2.3
MT in Q1FY11. However, on account of higher coking coal, cost EBITDA margin is
expected to decline by 320 bps QoQ and 420 bps YoY to 16.0%
Sesa Goa Sales volumes for Q1FY12E are expected to decline ~31% QoQ and decline ~34%
YoY. We expect a dip in the volumes due to no contribution from Karnataka. However,
the improvement in topline is expected on the back of better realisations, which is
expected improved from $90 in Q1FY11 to ~$107 in Q1FY12E.
Sterlite
Industries
The topline is expected to grow ~63% YoY on the back of higher performance from
the domestic and international zinc business. We expect EBITDA margins to improve
by 280 bps to 25.3% as compared to 22.5%in Q1FY11. PAT is expected to post growth
of ~5.7% YoY on the back of higher interest and depreciation cost
Tata Steel Consolidated sales volumes for Q1FY12E are expected to grow ~3% YoY but decline
~6% QoQ to 6.22 MT. Blended EBITDA margins are expected to decline by 180 bps
QoQ to 11.4% on the back of higher operating costs. We expect PAT to increase
sharply due to one-time gain on stake sale in Riversdale
Usha Martin The topline for Q1FY12 is expected to increase ~17.9% YoY but decline by ~7.7%
QoQ. However, on the back of higher coking coal costs the EBITDA margin is
expected to decline by 420 bps YoY to 17.2%. PAT is expected to decline ~33% YoY
on account of higher depreciation and interest cost
Visa Steel We expect overall sales volumes in Q1FY12E to grow ~48% YoY, we expect
significant contribution coming from sales of pig iron(~36,000), which was lower in
Q1FY11 at ~533 tonnes. EBITDA for Q1FY12 will improved ~20% YoY but
sequentially it is likly to be lower by 32% on the back of higher input cost
Source: Company, ICICIdirect.com Research
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