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Metals & Mining
EBITDA / tonne to decline marginally on a sequential basis
We expect the steel companies within our coverage universe to report
muted performance for Q3FY12E on the back of subdued demand
growth, higher operating costs and flattish realisation. The scenario of
rising interest rates and slow down in infrastructure spending has lead
to domestic steel consumption growing by merely 3.9% during the first
8 months of FY’12. Muted growth in steel demand has led to a marginal
decline in steel prices. As a result for Q3FY12E we expect EBITDA per
tonne of steel companies to decline in the range of ~ | 400 - |1800 per
tonne QoQ. For Q3FY12E we expect the EBITDA per tonne of Tata
Steel’s Indian operations to be ~| 15592 per tonne (| 16786 per tonne in
Q2FY12), while the EBITDA per tonne of JSW Steel is expected to be ~|
5024 per tonne (| 6861 per tonne in Q2FY12) and SAIL’s EBITDA per
tonne is expected to be ~ | 4390 per tonne (| 4754 per tonne in
Q2FY12).
Fall in Base metal prices to impact QoQ performance of Non Ferrous
players
Sequentially there has been a sharp fall witnessed in the Base Metal
prices on the LME. The quarterly average price of Aluminum during
Q3FY12 was ~ US$ 2096 per tonne which was lower by 13% QoQ &
~10% YoY. Similarly quarterly average prices of Copper during quarter
under review was ~ US$ 7511 per tonne lower by 16% QoQ & 13%
YoY, Zinc was ~ US$ 1906 per tonne lower by 14% QoQ and 18% YoY
& Lead was ~ US$ 1993 per tonne lower by 19% QoQ and 17% YoY.
However we expect that the depreciation in rupee may partially offset
fall in prices.
EBITDA margins to take a hit YoY
In Q3FY12E we expect the EBITDA of the ICICIdirect coverage universe
to decline by 16.6% YoY mainly on the back of higher operating costs.
EBITDA margins are expected to decline by 390 bps YoY to 14.7%. We
have not considered any impact of forex gain or losses in our profit
estimates. Profit number may vary, if companies accounts forex losses
or gains.
Company specific view
Company Remarks
Adhunik Metaliks Sequentially, we expect overall steel sales volume to increase by ~9% QoQ to
~90,000 tonnes. Iron ore sales volumes are expected to increase by 38% QoQ to
~0.29 million tonnes whereas manganese ore volumes are expected to be ~ 50,000
tonnes. We expect a subdued performance due to higher input costs
Graphite India We expect capacity utilisation of the graphite electrodes segment to be marginally
higher at ~85% (~84% in Q3FY11). On the back of better realisations we expect
topline to increase by ~ 18% however EBITDA margins are expected to decline by
230 bps YoY to 19.4% due to higher operating costs
HEG Capacity utilisation level of the graphite electrodes segment is expected to be ~85%
(~90% in Q3FY11). However due to improved realisations YoY we expect topline to
remain flat . EBITDA margins are expected to decline by 410 bps YoY to 18.3% on the
back of higher operating costs.
Hindustan
Zinc
We expect refined zinc sales to be at ~190,000 tonnes while lead volumes are
expected to be ~20,000 tonnes. Topline is expected to increase by 10.1% YoY and
10.4% QoQ. However on the back of decline seen in realisations we expect the
EBITDA margins to decline by ~750 bps QoQ to 49%.
JSW Steel The sales volume for Q3FY12 is expected to be ~1.9 MT which would be flat QoQ..
This would be first quarter in which the full impact of Karnataka mining Ban would be
seen. Hence on the back of higher raw material costs we expect EBITDA margin to
decline by 430 bps QoQ to 12.8%.
SAIL On a sequential basis, for Q3FY12 we expect the sales volumes & realisations to stay
flat at ~2.9 MT (~2.8 MT in Q2FY12). As a result we expect topline to remain flat on
a QoQ basis. The EBITDA margins are likely tp decline by 430 bps YoY & 50 bps QoQ
to ~11.6%
Sesa Goa Sales volumes for Q3FY12E is expected to be ~4.0 MT lower by ~25% YoY. EBITDA
margin is expected to decline by 940 bps YoY to 45.4%. Realisations for Q3FY12E is
expected to be ~US $ 80 per tonne. Depreciating of rupee is expected to partially
offset the decline in realisations QoQ.
Sterlite
Industries
Topline is expected to increase by 14% primarily on the back of contribution from
Anglo American Assets & SEL . The overall performance is expected to remain
subdued on the back fall seen in base metal prices and elevated cost structure in VAL,
BALCO and SEL.
Tata Steel Consolidated sales volumes for Q3FY12E are expected to decline ~3% QoQ to ~5.92
MT. Volumes from Indian operations are estiamted to be ~1.7 MT. We expect Tata
Steel Europe to report an EBITDA loss of ~US$ 82 million, based on shipment of 3.3
Mt and EBITDA loss of US$ 25/tonne.
Usha Martin The topline for Q3FY12 is expected to remain flat both QoQ however higher by 13%
YoY. On the back of higher operating costs, the EBITDA margin is expected to decline
by 50 bps YoY and 230 bps QoQ to 15.3%. PAT is expected to decline sharply on
account of higher interest cost
Visa Steel On the back of commissioning of SMS, we expect an increase in the share of value
added products in the overall product mix. Hence for Q3FY12, we expect the topline
to increase 16.9% YoY. Furthermore on the back of better product mix we expect
EBITDA margin to increase by 130 bps to 12.1% YoY.
Source: Company, ICICIdirect.com Research
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Metals & Mining
EBITDA / tonne to decline marginally on a sequential basis
We expect the steel companies within our coverage universe to report
muted performance for Q3FY12E on the back of subdued demand
growth, higher operating costs and flattish realisation. The scenario of
rising interest rates and slow down in infrastructure spending has lead
to domestic steel consumption growing by merely 3.9% during the first
8 months of FY’12. Muted growth in steel demand has led to a marginal
decline in steel prices. As a result for Q3FY12E we expect EBITDA per
tonne of steel companies to decline in the range of ~ | 400 - |1800 per
tonne QoQ. For Q3FY12E we expect the EBITDA per tonne of Tata
Steel’s Indian operations to be ~| 15592 per tonne (| 16786 per tonne in
Q2FY12), while the EBITDA per tonne of JSW Steel is expected to be ~|
5024 per tonne (| 6861 per tonne in Q2FY12) and SAIL’s EBITDA per
tonne is expected to be ~ | 4390 per tonne (| 4754 per tonne in
Q2FY12).
Fall in Base metal prices to impact QoQ performance of Non Ferrous
players
Sequentially there has been a sharp fall witnessed in the Base Metal
prices on the LME. The quarterly average price of Aluminum during
Q3FY12 was ~ US$ 2096 per tonne which was lower by 13% QoQ &
~10% YoY. Similarly quarterly average prices of Copper during quarter
under review was ~ US$ 7511 per tonne lower by 16% QoQ & 13%
YoY, Zinc was ~ US$ 1906 per tonne lower by 14% QoQ and 18% YoY
& Lead was ~ US$ 1993 per tonne lower by 19% QoQ and 17% YoY.
However we expect that the depreciation in rupee may partially offset
fall in prices.
EBITDA margins to take a hit YoY
In Q3FY12E we expect the EBITDA of the ICICIdirect coverage universe
to decline by 16.6% YoY mainly on the back of higher operating costs.
EBITDA margins are expected to decline by 390 bps YoY to 14.7%. We
have not considered any impact of forex gain or losses in our profit
estimates. Profit number may vary, if companies accounts forex losses
or gains.
Company specific view
Company Remarks
Adhunik Metaliks Sequentially, we expect overall steel sales volume to increase by ~9% QoQ to
~90,000 tonnes. Iron ore sales volumes are expected to increase by 38% QoQ to
~0.29 million tonnes whereas manganese ore volumes are expected to be ~ 50,000
tonnes. We expect a subdued performance due to higher input costs
Graphite India We expect capacity utilisation of the graphite electrodes segment to be marginally
higher at ~85% (~84% in Q3FY11). On the back of better realisations we expect
topline to increase by ~ 18% however EBITDA margins are expected to decline by
230 bps YoY to 19.4% due to higher operating costs
HEG Capacity utilisation level of the graphite electrodes segment is expected to be ~85%
(~90% in Q3FY11). However due to improved realisations YoY we expect topline to
remain flat . EBITDA margins are expected to decline by 410 bps YoY to 18.3% on the
back of higher operating costs.
Hindustan
Zinc
We expect refined zinc sales to be at ~190,000 tonnes while lead volumes are
expected to be ~20,000 tonnes. Topline is expected to increase by 10.1% YoY and
10.4% QoQ. However on the back of decline seen in realisations we expect the
EBITDA margins to decline by ~750 bps QoQ to 49%.
JSW Steel The sales volume for Q3FY12 is expected to be ~1.9 MT which would be flat QoQ..
This would be first quarter in which the full impact of Karnataka mining Ban would be
seen. Hence on the back of higher raw material costs we expect EBITDA margin to
decline by 430 bps QoQ to 12.8%.
SAIL On a sequential basis, for Q3FY12 we expect the sales volumes & realisations to stay
flat at ~2.9 MT (~2.8 MT in Q2FY12). As a result we expect topline to remain flat on
a QoQ basis. The EBITDA margins are likely tp decline by 430 bps YoY & 50 bps QoQ
to ~11.6%
Sesa Goa Sales volumes for Q3FY12E is expected to be ~4.0 MT lower by ~25% YoY. EBITDA
margin is expected to decline by 940 bps YoY to 45.4%. Realisations for Q3FY12E is
expected to be ~US $ 80 per tonne. Depreciating of rupee is expected to partially
offset the decline in realisations QoQ.
Sterlite
Industries
Topline is expected to increase by 14% primarily on the back of contribution from
Anglo American Assets & SEL . The overall performance is expected to remain
subdued on the back fall seen in base metal prices and elevated cost structure in VAL,
BALCO and SEL.
Tata Steel Consolidated sales volumes for Q3FY12E are expected to decline ~3% QoQ to ~5.92
MT. Volumes from Indian operations are estiamted to be ~1.7 MT. We expect Tata
Steel Europe to report an EBITDA loss of ~US$ 82 million, based on shipment of 3.3
Mt and EBITDA loss of US$ 25/tonne.
Usha Martin The topline for Q3FY12 is expected to remain flat both QoQ however higher by 13%
YoY. On the back of higher operating costs, the EBITDA margin is expected to decline
by 50 bps YoY and 230 bps QoQ to 15.3%. PAT is expected to decline sharply on
account of higher interest cost
Visa Steel On the back of commissioning of SMS, we expect an increase in the share of value
added products in the overall product mix. Hence for Q3FY12, we expect the topline
to increase 16.9% YoY. Furthermore on the back of better product mix we expect
EBITDA margin to increase by 130 bps to 12.1% YoY.
Source: Company, ICICIdirect.com Research
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