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O p e r a t i n g m a r g i n s t o r e m a i n u n d e r p r e s s u r e …
Usha Martin’s (UML) performance in Q2FY11 was broadly in line with our
expectations. The topline came at | 828.4 crore (our estimate: | 772.8
crore), which was 8.5% higher both YoY as well as QoQ. However, on the
back of higher input costs, the EBITDA margin declined 320 bps YoY and
130 bps QoQ to 17.6%. The subsequent EBITDA stood at | 145.4 crore
(our estimate: | 131.3 crore), which was 8.5% lower YoY and flattish
QoQ. The consolidated adjusted PAT during the quarter under review
stood at ~| 21.2 crore (our estimate: | 20.8 crore), which was lower by
53.8% YoY and 17.3% QoQ). Due to depreciation of the rupee against the
US$, there was net notional exchange loss to the tune of ~| 120 crore
arising out of restatement of outstanding foreign currency loans and
acceptances. As a result, the ensuing reported loss during the quarter
under review stood at | 62.7 crore.
ƒ Excessive monsoon leads to constraint in supply of captive minerals
UML’s performance during the quarter under review was impacted
on account of excessive monsoon and rainfall in the mining areas.
As a result, the iron ore and coal output from the mining areas was
impacted. During the quarter under review, the company achieved
iron ore output of 2.66 lakh tonnes (lower by 23% YoY and 29%
QoQ) while the coal output was 0.24 lakh tonnes (lower by 42% YoY
and 73% QoQ). As a result, the company had to buy metallic to
make up for lower availability of captive minerals. Furthermore,
higher cost of coking coal pushed up the cost of production, which
could not be passed on in full due to a slowdown in the economy
and auto sector in particular.
V a l u a t i o n
At the CMP of | 32, the stock is discounting FY13E EV/EBITDA by 4.3x
and P/E by 5.7x. Going forward, we believe the EBITDA margin would be
under pressure on the back of higher raw material costs and muted
demand. Hence, we believe the company’s performance would remain
subdued over the next few quarters. We have valued the stock at a 20%
discount to domestic blue chip companies, arriving at an EV/EBITDA
multiple of 4.4x and target price of | 34 and assigned a HOLD.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
O p e r a t i n g m a r g i n s t o r e m a i n u n d e r p r e s s u r e …
Usha Martin’s (UML) performance in Q2FY11 was broadly in line with our
expectations. The topline came at | 828.4 crore (our estimate: | 772.8
crore), which was 8.5% higher both YoY as well as QoQ. However, on the
back of higher input costs, the EBITDA margin declined 320 bps YoY and
130 bps QoQ to 17.6%. The subsequent EBITDA stood at | 145.4 crore
(our estimate: | 131.3 crore), which was 8.5% lower YoY and flattish
QoQ. The consolidated adjusted PAT during the quarter under review
stood at ~| 21.2 crore (our estimate: | 20.8 crore), which was lower by
53.8% YoY and 17.3% QoQ). Due to depreciation of the rupee against the
US$, there was net notional exchange loss to the tune of ~| 120 crore
arising out of restatement of outstanding foreign currency loans and
acceptances. As a result, the ensuing reported loss during the quarter
under review stood at | 62.7 crore.
ƒ Excessive monsoon leads to constraint in supply of captive minerals
UML’s performance during the quarter under review was impacted
on account of excessive monsoon and rainfall in the mining areas.
As a result, the iron ore and coal output from the mining areas was
impacted. During the quarter under review, the company achieved
iron ore output of 2.66 lakh tonnes (lower by 23% YoY and 29%
QoQ) while the coal output was 0.24 lakh tonnes (lower by 42% YoY
and 73% QoQ). As a result, the company had to buy metallic to
make up for lower availability of captive minerals. Furthermore,
higher cost of coking coal pushed up the cost of production, which
could not be passed on in full due to a slowdown in the economy
and auto sector in particular.
V a l u a t i o n
At the CMP of | 32, the stock is discounting FY13E EV/EBITDA by 4.3x
and P/E by 5.7x. Going forward, we believe the EBITDA margin would be
under pressure on the back of higher raw material costs and muted
demand. Hence, we believe the company’s performance would remain
subdued over the next few quarters. We have valued the stock at a 20%
discount to domestic blue chip companies, arriving at an EV/EBITDA
multiple of 4.4x and target price of | 34 and assigned a HOLD.
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