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For 2QFY2012, Sarda Energy and Minerals (SEML) reported net sales growth of
25.5% yoy to `251cr. Although SEML reported net loss during the quarter,
its adjusted net profit stood at `23cr. We recommend Accumulate on the stock.
Forex loss dents SEML’s 2QFY2012 bottom line: During 2QFY2012, SEML’s net
sales grew by 25.5% yoy to `251cr due to higher realization in the steel segment
coupled with higher sales volume of power. Blended steel realization grew by
71.0% yoy to `33,794/tonne on account of improved product mix and higher
product prices. EBITDA increased by 118.9% yoy to `35cr due to strong
profitability performance from the steel segment and higher power sales.
The company reported net loss of `10cr, primarily because of exceptional items
mainly related to forex losses. Excluding these exceptional items of `33cr, SEML’s
adjusted PAT stood at `23cr in 2QFY2012, compared to `1cr in 2QFY2011.
Outlook and valuation: We continue to believe that SEML is well poised to
benefit from a) backward integration into coal and iron ore, b) commercial
production of pellets and c) increased power and ferro alloy production.
Moreover, firm sponge iron and billet prices should lead to higher capacity
utilization in FY2012 and FY2013, thereby leading to higher sales volumes.
A key catalyst for the stock would be restarting of its iron ore operations at
Rajnandgaon. We recommend Accumulate on the stock with a target price of
`137, valuing the stock at 5.2x FY2013E EV/EBITDA.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
For 2QFY2012, Sarda Energy and Minerals (SEML) reported net sales growth of
25.5% yoy to `251cr. Although SEML reported net loss during the quarter,
its adjusted net profit stood at `23cr. We recommend Accumulate on the stock.
Forex loss dents SEML’s 2QFY2012 bottom line: During 2QFY2012, SEML’s net
sales grew by 25.5% yoy to `251cr due to higher realization in the steel segment
coupled with higher sales volume of power. Blended steel realization grew by
71.0% yoy to `33,794/tonne on account of improved product mix and higher
product prices. EBITDA increased by 118.9% yoy to `35cr due to strong
profitability performance from the steel segment and higher power sales.
The company reported net loss of `10cr, primarily because of exceptional items
mainly related to forex losses. Excluding these exceptional items of `33cr, SEML’s
adjusted PAT stood at `23cr in 2QFY2012, compared to `1cr in 2QFY2011.
Outlook and valuation: We continue to believe that SEML is well poised to
benefit from a) backward integration into coal and iron ore, b) commercial
production of pellets and c) increased power and ferro alloy production.
Moreover, firm sponge iron and billet prices should lead to higher capacity
utilization in FY2012 and FY2013, thereby leading to higher sales volumes.
A key catalyst for the stock would be restarting of its iron ore operations at
Rajnandgaon. We recommend Accumulate on the stock with a target price of
`137, valuing the stock at 5.2x FY2013E EV/EBITDA.
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