Visit http://indiaer.blogspot.com/ for complete details �� ��
Standalone performance: Higher volumes drive profitability
Tata Steel India reported net sales of INR 71.1 bn in Q2FY11, up 25% Y-o-Y and
9% Q-o-Q, ~7% higher than our estimates. Higher-than-expected sales volume
was the primary reason for the improved performance. We estimated sales
volumes of 1.55 mt against the actual 1.66 mt. EBITDA declined 9% Q-o-Q, but
was up 37% Y-o-Y, 6.5% higher than our estimates. Blended EBITDA/t, at INR
15,837/t, was in line with our estimate of INR 15,924/t. Net profit, at INR 20.7
bn, was higher than our estimates of INR 17.6 bn, up 31% Q-o-Q and 129% Yo-
Y.
Corus EBITDA at USD 56/t, driven by high other operating income
European operations reported sales volume of 3.53 mt, in line with our estimates
of 3.5 mt. EBITDA/t, at USD 55/t, was above our estimates of USD 42/t, due to
additional operating other income of ~USD 82 mn. However, other expenditure
also increased partly due to one-time fees/expenses related to debt refinancing.
Realisations surprised positively showing an increase of ~USD 50/t Q-o-Q. On a
consolidated basis, EBITDA at INR 36.7 bn (down 17% Q-o-Q) and net profit at
INR 19.8 bn (up 8.8% Q-o-Q) were higher than our estimates by 10.4% and
11.7%, respectively.
Proposed fund raising for capex and debt prepayment
The board has approved fund raising of INR 70 bn (~USD 1.5 bn) with a view to
part finance the ongoing 2.9 mtpa Jamshedpur expansion (on track for Q3FY12),
international raw material projects, investment in European operations and to
prepay debt. However, no capital raising is required for scheduled debt
repayments due to the recently completed debt refinancing. The management
has indicated that the instrument for the same has not been decided as yet.
Outlook and valuations: Positive; maintain ‘BUY’
We believe that Q3FY11 would see a squeeze in margins for Corus as steel prices
soften and full impact of high raw material prices flows through. However, we
continue to believe that FY12 will witness EBITDA margin expanding for Corus to
USD 80/t. In FY13, we see strong benefits from the 2.9 mtpa India expansion
and international raw material projects. We maintain our forward estimates and
maintain ‘BUY/SO’, with a fair valuation of INR 781/share.
No comments:
Post a Comment