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India Equity Research Reports, IPO and Stock News
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● We present 2Q12 estimates for metal stocks. In general, given the
sharp deterioration in fundamentals globally starting Sep-11, and
several company specific factors driving earnings volatility in 2Q,
results should not change the outlook on these stocks. However,
disappointments may be punished even if for a short duration.
● Steel: Marginally better volumes in India (~3%) QoQ not enough
to offset rising coal costs when steel prices were flat. We expect
SAIL’s EBITDA/t to reach US$117, up US$10 QoQ due to oneoffs
in 1Q12. Tata’s Indian EBITDA/t should fall to US$390, and
European to US$13. We forecast US$95/t for JSW: this may have
upside due to the use of low-cost inventory. That said, uncertainty
on 3Q12 and beyond and the associated commentary will be more
important.
● We expect HZL’s EBITDA to be ~US$350 mn (cost/t flat QoQ).
For Sterlite, lower alumina costs would only partially offset the fall
in Al prices. We forecast US$70 mn EBITDA from Zinc
International. With improvement in SEL volumes, we expect
Sterlite to deliver EBITDA of US$510 mn, -16% QoQ due to the
fall in LME Zn and Al.
● JSPL: 2Q12 is seasonally weak due to lower power prices and
shutdowns. We expect ASP to fall to Rs3.7/kwh (-4% QoQ). Steel
volumes should be flat, with a decline in EBITDA/t. CIL: A 3% YoY
fall in sales volume due to heavy rains. We build in a 20% YoY rise
in staff costs (wage hike provisioning). EPS Rs3.9.
We present 2Q FY12 estimates for metal stocks under our coverage.
Steel: Weak quarter expected due to rising costs
2Q12 results are likely to stay weak, with marginally better volumes
QoQ not enough to offset rising coal costs as companies were unable
to take price hikes.
● SAIL: We expect sales volume to be up 3.5% QoQ and EBITDA/t
of ~US$117, up by US$10 as 1Q12 had one-offs (personnel costs
and higher power and fuel expenditure).
● Tata Steel: We expect a 3% QoQ increase in volumes in India,
and EBITDA/t of ~US$390. European sales volumes are expected
to fall 3.3% YoY, driving negative operating leverage. Together
with price cuts and rising costs, EBITDA/t could fall US$65 QoQ to
~US$13.
● JSW: We expect a 3% QoQ rise in volumes (including Ispat rerolling
volumes) and EBITDA/t of ~US$95, a US$85 fall QoQ.
Hindustan Zinc: Flat quarter expected
With average Zinc prices down US$20 QoQ and lead prices down
US$77/t, we expect 2Q12 EBITDA to be ~US$350 mn (cost/t flat
QoQ). Concentrate sales declined with lead smelter commissioning.
Sterlite: Lacklustre quarter, commentary on Power/VAL imp.
Lower alumina costs would only partially offset the decline in
aluminium prices: we expect Balco’s EBITDA/T to be US$570. We
expect US$70 mn EBITDA from Zinc International (Anglo). With
improvement in SEL volumes, we expect the group to deliver EBITDA
of US$510 mn, a 16% decline QoQ.
JSPL: Power weaker, steel flat
The power segment results are expected to be weaker QoQ as 2Q12
is seasonally weak due to lower prices and shutdowns. We expect
average realisation to fall to Rs3.7/unit (down 4% QoQ). We expect
the steel business to deliver flat volumes. However, like at other steel
companies, raw material costs could hurt.
Coal India: Seasonally weak, commentary on guidance imp.
We expect a 3% YoY decline in offtake due to heavy rains in the
quarter. We have built in a 20% YoY increase in personnel costs due
to wage hike provisioning. Commentary on several concerns on the
stock: (1) FY12 volume guidance, (2) rake availability and (3) wage
negotiations would be important things we would look out for.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
● We present 2Q12 estimates for metal stocks. In general, given the
sharp deterioration in fundamentals globally starting Sep-11, and
several company specific factors driving earnings volatility in 2Q,
results should not change the outlook on these stocks. However,
disappointments may be punished even if for a short duration.
● Steel: Marginally better volumes in India (~3%) QoQ not enough
to offset rising coal costs when steel prices were flat. We expect
SAIL’s EBITDA/t to reach US$117, up US$10 QoQ due to oneoffs
in 1Q12. Tata’s Indian EBITDA/t should fall to US$390, and
European to US$13. We forecast US$95/t for JSW: this may have
upside due to the use of low-cost inventory. That said, uncertainty
on 3Q12 and beyond and the associated commentary will be more
important.
● We expect HZL’s EBITDA to be ~US$350 mn (cost/t flat QoQ).
For Sterlite, lower alumina costs would only partially offset the fall
in Al prices. We forecast US$70 mn EBITDA from Zinc
International. With improvement in SEL volumes, we expect
Sterlite to deliver EBITDA of US$510 mn, -16% QoQ due to the
fall in LME Zn and Al.
● JSPL: 2Q12 is seasonally weak due to lower power prices and
shutdowns. We expect ASP to fall to Rs3.7/kwh (-4% QoQ). Steel
volumes should be flat, with a decline in EBITDA/t. CIL: A 3% YoY
fall in sales volume due to heavy rains. We build in a 20% YoY rise
in staff costs (wage hike provisioning). EPS Rs3.9.
We present 2Q FY12 estimates for metal stocks under our coverage.
Steel: Weak quarter expected due to rising costs
2Q12 results are likely to stay weak, with marginally better volumes
QoQ not enough to offset rising coal costs as companies were unable
to take price hikes.
● SAIL: We expect sales volume to be up 3.5% QoQ and EBITDA/t
of ~US$117, up by US$10 as 1Q12 had one-offs (personnel costs
and higher power and fuel expenditure).
● Tata Steel: We expect a 3% QoQ increase in volumes in India,
and EBITDA/t of ~US$390. European sales volumes are expected
to fall 3.3% YoY, driving negative operating leverage. Together
with price cuts and rising costs, EBITDA/t could fall US$65 QoQ to
~US$13.
● JSW: We expect a 3% QoQ rise in volumes (including Ispat rerolling
volumes) and EBITDA/t of ~US$95, a US$85 fall QoQ.
Hindustan Zinc: Flat quarter expected
With average Zinc prices down US$20 QoQ and lead prices down
US$77/t, we expect 2Q12 EBITDA to be ~US$350 mn (cost/t flat
QoQ). Concentrate sales declined with lead smelter commissioning.
Sterlite: Lacklustre quarter, commentary on Power/VAL imp.
Lower alumina costs would only partially offset the decline in
aluminium prices: we expect Balco’s EBITDA/T to be US$570. We
expect US$70 mn EBITDA from Zinc International (Anglo). With
improvement in SEL volumes, we expect the group to deliver EBITDA
of US$510 mn, a 16% decline QoQ.
JSPL: Power weaker, steel flat
The power segment results are expected to be weaker QoQ as 2Q12
is seasonally weak due to lower prices and shutdowns. We expect
average realisation to fall to Rs3.7/unit (down 4% QoQ). We expect
the steel business to deliver flat volumes. However, like at other steel
companies, raw material costs could hurt.
Coal India: Seasonally weak, commentary on guidance imp.
We expect a 3% YoY decline in offtake due to heavy rains in the
quarter. We have built in a 20% YoY increase in personnel costs due
to wage hike provisioning. Commentary on several concerns on the
stock: (1) FY12 volume guidance, (2) rake availability and (3) wage
negotiations would be important things we would look out for.
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