Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
What is the stock pricing in at current price of sub and itself? Based
on HZL (NR) mcap, STLT’s 65% holding is valued at Rs340B, while its
own market cap (diluted) stands at Rs427B, implying that investors are
valuing the overseas zinc assets (for which STLT paid $1.3B), copper
smelter, and 51% holding in BALCO, for a total of $1.9B. At current
commodity prices, the above earnings imply 3x EV/EBITDA for the
above assets.
Zero value for the aluminum and power investments: This does not
include the $3.3B investment (equity + debt) in aluminum and power, as
essentially the market is viewing these as loss-making entities for the
foreseeable future. The recent correction in spot alumina and China’s
sharply increasing domestic production is something we would closely
watch as it could provide some relief for the aluminum subsidiary.
What is the zinc segment pricing in? At current LME zinc prices, the
zinc subsidiary is trading at 5x, while at long-term zinc prices
($2000/MT), it is trading at 6.1x EV/EBITDA. On current commodity
prices, STLT’s EPS would drop to Rs18/21 for FY12E/13E from current
JPMe of Rs21/24 while on LT commodity prices, it would fall to
Rs16.5/17.
STLT pricing in further support for aluminum, lack of access to
zinc segment cash: STLT’s stock has corrected in sync with parent VED
(down 26% since the end of July, compared to 31% for VED). Given the
strong volume growth in zinc and silver, we believe the recent correction
indicates the market’s concerns about an increase in support to aluminum
entities (currently loss-making) as parent VED’s leverage increases after
the CAIRN acquisition, while at the same time gives a steep discount to
zinc subsidiary, indicating market’s concerns on lack of access to cash at
the subsidiary. We believe these concerns are overdone and STLT can
access the cash (if required) via dividends. Management did on the
conference call indicate that its investment into VAL would be limited to
its holding (~30%). Zinc and aluminum prices are near to their long-term
averages and thus earnings downside looks limited for STLT.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
What is the stock pricing in at current price of sub and itself? Based
on HZL (NR) mcap, STLT’s 65% holding is valued at Rs340B, while its
own market cap (diluted) stands at Rs427B, implying that investors are
valuing the overseas zinc assets (for which STLT paid $1.3B), copper
smelter, and 51% holding in BALCO, for a total of $1.9B. At current
commodity prices, the above earnings imply 3x EV/EBITDA for the
above assets.
Zero value for the aluminum and power investments: This does not
include the $3.3B investment (equity + debt) in aluminum and power, as
essentially the market is viewing these as loss-making entities for the
foreseeable future. The recent correction in spot alumina and China’s
sharply increasing domestic production is something we would closely
watch as it could provide some relief for the aluminum subsidiary.
What is the zinc segment pricing in? At current LME zinc prices, the
zinc subsidiary is trading at 5x, while at long-term zinc prices
($2000/MT), it is trading at 6.1x EV/EBITDA. On current commodity
prices, STLT’s EPS would drop to Rs18/21 for FY12E/13E from current
JPMe of Rs21/24 while on LT commodity prices, it would fall to
Rs16.5/17.
STLT pricing in further support for aluminum, lack of access to
zinc segment cash: STLT’s stock has corrected in sync with parent VED
(down 26% since the end of July, compared to 31% for VED). Given the
strong volume growth in zinc and silver, we believe the recent correction
indicates the market’s concerns about an increase in support to aluminum
entities (currently loss-making) as parent VED’s leverage increases after
the CAIRN acquisition, while at the same time gives a steep discount to
zinc subsidiary, indicating market’s concerns on lack of access to cash at
the subsidiary. We believe these concerns are overdone and STLT can
access the cash (if required) via dividends. Management did on the
conference call indicate that its investment into VAL would be limited to
its holding (~30%). Zinc and aluminum prices are near to their long-term
averages and thus earnings downside looks limited for STLT.
No comments:
Post a Comment