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*Steel Authoritiy of India ( SAIL ) * * * *
CMP 80.60
Target 130* ****
*Company Description*
** **
Steel Authority of India Limited (SAIL) is an India-based steel making
company. The Company’s business segments include five integrated steel
plants and three alloy steel plants, which are manufacturing units. SAIL’s
principal products include hot rolled coils, plates and rails. During the
fiscal year ended March 31, 2011 (fiscal 2011), the Company’s main steel
plants produced 260,829 tons of pig iron; 13,453,059 tons of crude steel,
and 12,324,973 tones of saleable steel. During fiscal 2011, its alloy
steels plants produced 2,341 tons of pig iron; 308,733 tons of crude steel,
and 550,238 tones of saleable steel. During fiscal 2011, SAIL also produced
14.9 million tons of hot metal and 13.8 million tons of crude steel. During
fiscal 2011, SAIL produced 10.5 million tons of finished steel. As of April
1, 2011, SAIL had a network of 2653 dealers spread over 637 districts. The
Company’s subsidiary is The Maharashtra Elektrosmelt Limited (MEL).****
** **
SAIL is one of the leading steel manufacturers in ****India**** and is
ranked 21st largest steel producer in the world. The company is a fully
integrated iron and steel manufacturer with captive iron ore mines. SAIL is
one of the largest producers of Iron ore in ****India****. The captive
mines assure the supply of Iron ore to the company at a lower cost. The
company makes both, basic and special types of steel. The company’s
products find their application in domestic construction, engineering,
power, railway, automotive and defense industries.****
** **
SAIL also caters to the requirements of the exports market. SAIL operates
through 8 manufacturing plants in ****India****. Amongst all the plants the
Bhilai steel plant accounts for a major chunk of revenues and is engaged in
the manufacturing of semi-finished products, Flat products and Long
Products. ****
****
****
*Investment Arguments *
* *
*~ Business *Scalability through Huge Capex* *
*~ Increasing *Number of Touch Points**
*~Short *Term Pain but Long Term Gain**
*~Consistent *Dividend Player****
*~Strong *Balance Sheet****
*~ Valuation*
****
****
**
** **
*Valuation*
* *
We expect all short term negativity is already discounted by the market and
current price is attractive for long term investors. ****
* *
We use EV/EBITDA as valuation metric for the steel companies given the high
debt-equity levels. SAIL has traditionally traded at a discount to both
Tata Steel and JSW Steel based on its history, status as a government
company and lower rate of volume growth.****
** **
Our Rs130 target price is based on FY13 EV/EBITDA of 6.2x, SAIL's target
EV/EBITDA multiple is slightly lower than its 3-year average of 7x. ****
****
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
*Steel Authoritiy of India ( SAIL ) * * * *
CMP 80.60
Target 130* ****
*Company Description*
** **
Steel Authority of India Limited (SAIL) is an India-based steel making
company. The Company’s business segments include five integrated steel
plants and three alloy steel plants, which are manufacturing units. SAIL’s
principal products include hot rolled coils, plates and rails. During the
fiscal year ended March 31, 2011 (fiscal 2011), the Company’s main steel
plants produced 260,829 tons of pig iron; 13,453,059 tons of crude steel,
and 12,324,973 tones of saleable steel. During fiscal 2011, its alloy
steels plants produced 2,341 tons of pig iron; 308,733 tons of crude steel,
and 550,238 tones of saleable steel. During fiscal 2011, SAIL also produced
14.9 million tons of hot metal and 13.8 million tons of crude steel. During
fiscal 2011, SAIL produced 10.5 million tons of finished steel. As of April
1, 2011, SAIL had a network of 2653 dealers spread over 637 districts. The
Company’s subsidiary is The Maharashtra Elektrosmelt Limited (MEL).****
** **
SAIL is one of the leading steel manufacturers in ****India**** and is
ranked 21st largest steel producer in the world. The company is a fully
integrated iron and steel manufacturer with captive iron ore mines. SAIL is
one of the largest producers of Iron ore in ****India****. The captive
mines assure the supply of Iron ore to the company at a lower cost. The
company makes both, basic and special types of steel. The company’s
products find their application in domestic construction, engineering,
power, railway, automotive and defense industries.****
** **
SAIL also caters to the requirements of the exports market. SAIL operates
through 8 manufacturing plants in ****India****. Amongst all the plants the
Bhilai steel plant accounts for a major chunk of revenues and is engaged in
the manufacturing of semi-finished products, Flat products and Long
Products. ****
****
****
*Investment Arguments *
* *
*~ Business *Scalability through Huge Capex* *
*~ Increasing *Number of Touch Points**
*~Short *Term Pain but Long Term Gain**
*~Consistent *Dividend Player****
*~Strong *Balance Sheet****
*~ Valuation*
****
****
**
** **
*Valuation*
* *
We expect all short term negativity is already discounted by the market and
current price is attractive for long term investors. ****
* *
We use EV/EBITDA as valuation metric for the steel companies given the high
debt-equity levels. SAIL has traditionally traded at a discount to both
Tata Steel and JSW Steel based on its history, status as a government
company and lower rate of volume growth.****
** **
Our Rs130 target price is based on FY13 EV/EBITDA of 6.2x, SAIL's target
EV/EBITDA multiple is slightly lower than its 3-year average of 7x. ****
****
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