Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Operational struggle continues, reiterate sell
SAIL’s operational performance remained below expectations with Q4FY12 EBITDA
at Rs18.7bn and margin of 13.7% (lower by 100bps QoQ). Reported PAT at Rs15.8bn
included exceptional gain of Rs7.2bn on account of entry tax write-back for Bhilai
steel plant and forex fluctuations. Adj. PAT stood at Rs10.8bn (~5% lower than our
expectation of Rs11.4bn). Realisations improved 4.5% QoQ but costs remained
higher as other expenses and raw material costs went up sequentially. Also, a
decrease in stock in trade was seen which we believe would have been due to old
high cost inventory sales during Q4FY12. Expansion progress still remains slow and
incremental volumes from IISCO and Bokaro are not expected before H2FY13E. We
revise our volume and EBITDA estimates lower for FY13E/14E. Maintain sell.
Volumes and realisations improve: Steel sales volume stood at ~3.2MT (our est.
~3.1 MT), higher by ~2.2% YoY and ~22% QoQ. Sales volumes improved after a
dismal Q3FY12 but remained lower than production of 3.3 MT as the company
continues to find it hard to push volumes in a competitive domestic steel market.
Realizations improved by 4.5% sequentially as steel prices improved in the domestic
market (especially for longs).
Inventory remains high, EBITDA lower on high costs: SAIL’s inventory remains
high with total steel products inventory reaching ~1.4 MT as on Mar’12. EBITDA
stood at Rs18.7bn (margin of 13.7%), lower sequentially on account of ~Rs6.3bn
reduction to stock in trade on account of previous high cost inventory sales during
the quarter. Power, fuel and other operational costs remained high and SAIL
continues to remain the highest cost converter among the large domestic steel
players on account of high operational costs.
Expansion projects to start coming on-stream from FY13E: SAIL’s expansion
projects continue to progress at a slow pace and capex during FY12 stood at a lowerthan-
expected Rs11bn (against guidance of Rs12.5bn). The company has guided
towards Rs14.5bn capex for FY13E towards modernization and expansion activities
and expects commissioning of IISCO and Bokaro expansions during FY13E. SAIL has
seen its interest earning cash investments drop by Rs11bn during FY12 on account
of substantial debt repayments and capex from internal accruals. This is expected to
reduce other income for SAIl from FY13E onwards and also increase debt funding
going ahead. We remain concerned on the slow progress of expansion projects and
have apprehensions over the ability of the company to sell higher quantities in a
competitive domestic market with new capacities brought on-stream by all large
domestic steel players well before SAIL. We revise our earnings estimate lower
factoring in lower steel volumes, higher blended realizations and higher other
expenses. We revise our FY13E/14E EBITDA lower by 3.6%/5.7%.
Maintain sell: We maintain our bearish stance on SAIL on account of reduced competitive
capability and high operational cost. We remain skeptical on the company’s ability to push
volumes in a competitive market going forward and simultaneously maintain margin and
realizations. We value the company at 5x FY14E EV/EBITDA (discount of 10% to global
average) and FY14E expected outstanding CWIP at 0.6x to arrive at a target price of Rs88.
Maintain Sell.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Operational struggle continues, reiterate sell
SAIL’s operational performance remained below expectations with Q4FY12 EBITDA
at Rs18.7bn and margin of 13.7% (lower by 100bps QoQ). Reported PAT at Rs15.8bn
included exceptional gain of Rs7.2bn on account of entry tax write-back for Bhilai
steel plant and forex fluctuations. Adj. PAT stood at Rs10.8bn (~5% lower than our
expectation of Rs11.4bn). Realisations improved 4.5% QoQ but costs remained
higher as other expenses and raw material costs went up sequentially. Also, a
decrease in stock in trade was seen which we believe would have been due to old
high cost inventory sales during Q4FY12. Expansion progress still remains slow and
incremental volumes from IISCO and Bokaro are not expected before H2FY13E. We
revise our volume and EBITDA estimates lower for FY13E/14E. Maintain sell.
Volumes and realisations improve: Steel sales volume stood at ~3.2MT (our est.
~3.1 MT), higher by ~2.2% YoY and ~22% QoQ. Sales volumes improved after a
dismal Q3FY12 but remained lower than production of 3.3 MT as the company
continues to find it hard to push volumes in a competitive domestic steel market.
Realizations improved by 4.5% sequentially as steel prices improved in the domestic
market (especially for longs).
Inventory remains high, EBITDA lower on high costs: SAIL’s inventory remains
high with total steel products inventory reaching ~1.4 MT as on Mar’12. EBITDA
stood at Rs18.7bn (margin of 13.7%), lower sequentially on account of ~Rs6.3bn
reduction to stock in trade on account of previous high cost inventory sales during
the quarter. Power, fuel and other operational costs remained high and SAIL
continues to remain the highest cost converter among the large domestic steel
players on account of high operational costs.
Expansion projects to start coming on-stream from FY13E: SAIL’s expansion
projects continue to progress at a slow pace and capex during FY12 stood at a lowerthan-
expected Rs11bn (against guidance of Rs12.5bn). The company has guided
towards Rs14.5bn capex for FY13E towards modernization and expansion activities
and expects commissioning of IISCO and Bokaro expansions during FY13E. SAIL has
seen its interest earning cash investments drop by Rs11bn during FY12 on account
of substantial debt repayments and capex from internal accruals. This is expected to
reduce other income for SAIl from FY13E onwards and also increase debt funding
going ahead. We remain concerned on the slow progress of expansion projects and
have apprehensions over the ability of the company to sell higher quantities in a
competitive domestic market with new capacities brought on-stream by all large
domestic steel players well before SAIL. We revise our earnings estimate lower
factoring in lower steel volumes, higher blended realizations and higher other
expenses. We revise our FY13E/14E EBITDA lower by 3.6%/5.7%.
Maintain sell: We maintain our bearish stance on SAIL on account of reduced competitive
capability and high operational cost. We remain skeptical on the company’s ability to push
volumes in a competitive market going forward and simultaneously maintain margin and
realizations. We value the company at 5x FY14E EV/EBITDA (discount of 10% to global
average) and FY14E expected outstanding CWIP at 0.6x to arrive at a target price of Rs88.
Maintain Sell.
No comments:
Post a Comment