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E x e c u t i o n t h e k e y …
Visa Steel’s Q1FY12 numbers came in line with our estimates with net
sales coming in at | 367.2 core (up ~66.5% YoY and down ~14.5% QoQ)
(I direct estimate of ~| 369 crore). The EBITDA of the company came in at
| 44.8 crore (I-direct estimate: | 46.7 crore) growth of ~13.2% YoY
whereas sequentially it witnessed a sharp dip of ~40% as Q4FY11 was
the best quarter in volume and realisation terms. Net profit of the
company was higher ~39% YoY but lower ~56% QoQ at | 10.1 crore (Idirect estimate: | 7.9 crore). We had estimated higher depreciation as we
assumed the new steel plant would be capitalised in the quarter
(Q1FY12). However, it has not been capitalised and is expected to be
capitalised in Q2FY12. Interest cost came in line with our estimate at | 18
crore (I direct estimate: 18.5 crore), which was higher ~6.7% YoY but
lower 3.3% QoQ.
ƒ YoY improvement in sales volumes and realisations
The sales volumes and realisations for the quarter under review
have improved across all segments as compared to Q1FY11. Coke
volumes improved ~43% YoY whereas sequentially they dipped
~17%. Overall metallic sales improved ~76% YoY and 23% QoQ.
This was due to improved availability of iron ore, which, in turn, led
to higher production of pig iron (which was merely 3223 MT in
Q1FY11). Ferro chrome volumes have jumped ~24% YoY but
declined ~24% QoQ.
V a l u a t i o n
With the capacity ramp up coming in at its steel plant, the performance of
the company is set to improve. Thus, the high sales from value-added
products will help it to generate better realisation and higher margins.
However, the timeliness in the execution and commissioning of the steel
plant is the key parameter that needs to be watched. At the CMP of | 59,
the stock is discounting FY12E and FY13E EV/EBITDA of 7.2x and 4.9x
and P/E by 10x and 6.8x, respectively. We have valued the stock on
FY13E EV/EBITDA multiple of 5x giving us a target price of | 62, thus
maintaining our HOLD rating on the stock.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
E x e c u t i o n t h e k e y …
Visa Steel’s Q1FY12 numbers came in line with our estimates with net
sales coming in at | 367.2 core (up ~66.5% YoY and down ~14.5% QoQ)
(I direct estimate of ~| 369 crore). The EBITDA of the company came in at
| 44.8 crore (I-direct estimate: | 46.7 crore) growth of ~13.2% YoY
whereas sequentially it witnessed a sharp dip of ~40% as Q4FY11 was
the best quarter in volume and realisation terms. Net profit of the
company was higher ~39% YoY but lower ~56% QoQ at | 10.1 crore (Idirect estimate: | 7.9 crore). We had estimated higher depreciation as we
assumed the new steel plant would be capitalised in the quarter
(Q1FY12). However, it has not been capitalised and is expected to be
capitalised in Q2FY12. Interest cost came in line with our estimate at | 18
crore (I direct estimate: 18.5 crore), which was higher ~6.7% YoY but
lower 3.3% QoQ.
ƒ YoY improvement in sales volumes and realisations
The sales volumes and realisations for the quarter under review
have improved across all segments as compared to Q1FY11. Coke
volumes improved ~43% YoY whereas sequentially they dipped
~17%. Overall metallic sales improved ~76% YoY and 23% QoQ.
This was due to improved availability of iron ore, which, in turn, led
to higher production of pig iron (which was merely 3223 MT in
Q1FY11). Ferro chrome volumes have jumped ~24% YoY but
declined ~24% QoQ.
V a l u a t i o n
With the capacity ramp up coming in at its steel plant, the performance of
the company is set to improve. Thus, the high sales from value-added
products will help it to generate better realisation and higher margins.
However, the timeliness in the execution and commissioning of the steel
plant is the key parameter that needs to be watched. At the CMP of | 59,
the stock is discounting FY12E and FY13E EV/EBITDA of 7.2x and 4.9x
and P/E by 10x and 6.8x, respectively. We have valued the stock on
FY13E EV/EBITDA multiple of 5x giving us a target price of | 62, thus
maintaining our HOLD rating on the stock.
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