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Sesa Goa Limited
Lowering estimates on iron ore
price revision
Cutting est. on lower iron ore prices, Underperform
Our global team has cut its spot price est. for FY12/13 by 8%/2% (Metals
Strategist, 01 December 2011) due to the worsening macro. We cut our FY12-
13E EPS by 3-7% and our PO to Rs195 as we incorporate the lower spot price
est., lower vols. and a weaker INR. We believe iron ore prices could correct
further and retest recent lows of US$120/t CFR in the near term (spot US$133/t),
but the medium-term outlook remains positive, in our view. We remain cautious
on Sesa as it faces multiple headwinds due to the mining ban uncertainty in
Karnataka, the risk of mining/export curbs in Goa (~90% of vols.) due to illegal
mining concerns, logistic issues in Goa and the proposed mining tax.
FY12E EPS of Rs36.0 and FY13E EPS of Rs35.9
We forecast ASP of Rs4411/t in FY12 and Rs4060/t in FY13e. We also factor in
lower output from Karnataka mines in FY13. We forecast volumes of 18.9wmt in
FY12e (-7%YoY) and 22wmt in FY13e (16%YoY). Our base-case forecast
assumes the Karnataka mining ban is lifted and Sesa’s Karnataka mine restarts in
FY13. Our FY13e EPS would be lower by 14%, at Rs30.8, if the mining ban
continues in FY13.
Iron ore: near-term pressure, positive medium term
We expect spot prices to correct near term, due to weak Chinese steel demand
(assuming no significant monetary easing) and high iron ore inventory levels. But
Chinese steel demand growth (5.8%YoY in CY12E), high Chinese costs and
continued supply issues should support prices in the medium term. BoFAML
forecasts spot prices of US$159/t in FY12 and US$151/t in FY13e.
Karnataka mining ban hearing deferred till Jan
The Supreme Court has deferred the hearing on the Karnataka mining ban until
Jan 20. This delays the potential resolution of the mining ban. Also potential
export/ mining curbs in Goa, due to the ongoing illegal mining enquiry, are a
worry. But the submission of the Shah Commission report has been deferred to
January
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Sesa Goa Limited
Lowering estimates on iron ore
price revision
Cutting est. on lower iron ore prices, Underperform
Our global team has cut its spot price est. for FY12/13 by 8%/2% (Metals
Strategist, 01 December 2011) due to the worsening macro. We cut our FY12-
13E EPS by 3-7% and our PO to Rs195 as we incorporate the lower spot price
est., lower vols. and a weaker INR. We believe iron ore prices could correct
further and retest recent lows of US$120/t CFR in the near term (spot US$133/t),
but the medium-term outlook remains positive, in our view. We remain cautious
on Sesa as it faces multiple headwinds due to the mining ban uncertainty in
Karnataka, the risk of mining/export curbs in Goa (~90% of vols.) due to illegal
mining concerns, logistic issues in Goa and the proposed mining tax.
FY12E EPS of Rs36.0 and FY13E EPS of Rs35.9
We forecast ASP of Rs4411/t in FY12 and Rs4060/t in FY13e. We also factor in
lower output from Karnataka mines in FY13. We forecast volumes of 18.9wmt in
FY12e (-7%YoY) and 22wmt in FY13e (16%YoY). Our base-case forecast
assumes the Karnataka mining ban is lifted and Sesa’s Karnataka mine restarts in
FY13. Our FY13e EPS would be lower by 14%, at Rs30.8, if the mining ban
continues in FY13.
Iron ore: near-term pressure, positive medium term
We expect spot prices to correct near term, due to weak Chinese steel demand
(assuming no significant monetary easing) and high iron ore inventory levels. But
Chinese steel demand growth (5.8%YoY in CY12E), high Chinese costs and
continued supply issues should support prices in the medium term. BoFAML
forecasts spot prices of US$159/t in FY12 and US$151/t in FY13e.
Karnataka mining ban hearing deferred till Jan
The Supreme Court has deferred the hearing on the Karnataka mining ban until
Jan 20. This delays the potential resolution of the mining ban. Also potential
export/ mining curbs in Goa, due to the ongoing illegal mining enquiry, are a
worry. But the submission of the Shah Commission report has been deferred to
January
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