Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Following the recent Supreme Court (SC) directive, we expect detailed
review of all Karnataka mines over the next 3‐4 months and
conservatively expect Sesa Goa’s Karnataka mine to restart only in
Q1FY13. We cut FY12 & FY13 volumes by ~10% and ~4.3% respectively.
Also, we reduce our target FY13E EV/EBITDA from 4.5x to 4.0x to factor in
potential volume risks in Goa and any penalties for Karnataka restart. We
remove the stock from ‘UNDER REVIEW’ and recommend ‘HOLD’ on it,
with reduced target price of INR 258/share (earlier INR 299).
Expect Karnataka mine restart in Q1FY13
Sesa Goa’s Karnataka mine has been examined and cleared by concerned authorities in
the past. Hence, we are confident of a restart in Q1FY13 (conservative estimate), albeit
on certain conditions. We cut Karnataka FY12 and FY13 volumes from 4mt and 6mt to
2mt and 5mt, respectively.
Potential risk to part of Goan operations
Erstwhile Dempo mines of Sesa Goa (producing ~3.5mtpa; 15% of FY13 volumes) have
obtained environmental clearances under the 1994 regulations. In future, we see the
company running the risk of being required to obtain clearances under 2006
regulations; otherwise, the affected mines could temporarily lose production.
Outlook and valuations: Volume risks; maintain ‘HOLD’
We cut our FY12 and FY13 EBITDA estimates by ~6.6% and ~4%, respectively, led by
reduced Karnataka operations. We cut our FY13 EV/EBITDA from 4.5x to 4.0x, a 15%
discount to 5-year average of 4.7x, to factor in volume growth issues. We retain our
‘HOLD/ Sector Performer’ recommendation, but reduce our target price from INR 299
to INR 258/share.
Valuation: Fair value of INR 258/share
We continue to base our target price on average of EV/EBITDA and DCF methods. On an
EV/EBITDA basis, we value Sesa at 4x FY13E EBITDA to arrive at a affair value of INR
262/share which incorporates investment in Cairn(at 20% holding complay discount, INR
101/share attributable to Sesa). On DCF basis, the fair value is INR 254/share. We roll over
to FY13 and our price target is revised to INR 258/share.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Following the recent Supreme Court (SC) directive, we expect detailed
review of all Karnataka mines over the next 3‐4 months and
conservatively expect Sesa Goa’s Karnataka mine to restart only in
Q1FY13. We cut FY12 & FY13 volumes by ~10% and ~4.3% respectively.
Also, we reduce our target FY13E EV/EBITDA from 4.5x to 4.0x to factor in
potential volume risks in Goa and any penalties for Karnataka restart. We
remove the stock from ‘UNDER REVIEW’ and recommend ‘HOLD’ on it,
with reduced target price of INR 258/share (earlier INR 299).
Expect Karnataka mine restart in Q1FY13
Sesa Goa’s Karnataka mine has been examined and cleared by concerned authorities in
the past. Hence, we are confident of a restart in Q1FY13 (conservative estimate), albeit
on certain conditions. We cut Karnataka FY12 and FY13 volumes from 4mt and 6mt to
2mt and 5mt, respectively.
Potential risk to part of Goan operations
Erstwhile Dempo mines of Sesa Goa (producing ~3.5mtpa; 15% of FY13 volumes) have
obtained environmental clearances under the 1994 regulations. In future, we see the
company running the risk of being required to obtain clearances under 2006
regulations; otherwise, the affected mines could temporarily lose production.
Outlook and valuations: Volume risks; maintain ‘HOLD’
We cut our FY12 and FY13 EBITDA estimates by ~6.6% and ~4%, respectively, led by
reduced Karnataka operations. We cut our FY13 EV/EBITDA from 4.5x to 4.0x, a 15%
discount to 5-year average of 4.7x, to factor in volume growth issues. We retain our
‘HOLD/ Sector Performer’ recommendation, but reduce our target price from INR 299
to INR 258/share.
Valuation: Fair value of INR 258/share
We continue to base our target price on average of EV/EBITDA and DCF methods. On an
EV/EBITDA basis, we value Sesa at 4x FY13E EBITDA to arrive at a affair value of INR
262/share which incorporates investment in Cairn(at 20% holding complay discount, INR
101/share attributable to Sesa). On DCF basis, the fair value is INR 254/share. We roll over
to FY13 and our price target is revised to INR 258/share.
No comments:
Post a Comment