Metals & Mining ƒ Steel demand continues to remain subdued, prices remained flattishƒ :Q3FY15 Result Preview : ICICI Securities, report

Please Share::

�� India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details ��

��

-->
Metals & Mining
ƒ Steel demand continues to remain subdued, prices remained flattish
On the ferrous metal front, steel demand remained subdued with steel
consumption growing by merely by 1.3% to 48.62 million tonnes (MT)
during the period Apr’14-Nov’14. Imports increased by 49% to 5.5 MT
whereas exports decreased by 5.3% to 3.5 MT, making India net
importer of total finished steel in April-November period. During the
quarter under review global steel prices have declined by ~5% QoQ.
However despite marginal fall in global steel prices domestic prices
remained flattish on account depreciation rupee (US$: |~ 61.94 during
Q3FY15 as compared to US$: |~ 60.57 during Q2FY15). During the
quarter under review steel companies are likely to be the beneficiary of
subdued prices of key raw materials such as iron ore and coking coal.
ƒ Non ferrous metal prices remained subdued QoQ
Non ferrous metal price during the quarter under review was subdued
wherein decline was witnessed in prices of all the four major non
ferrous metals namely lead, zinc, copper and aluminium. During the
quarter average price of copper was US$6634/tonne, down 5.2% QoQ
and 7.3% YoY; lead was US$2001/tonne, down by 8.2% QoQ and 5.3%
YoY; zinc was US$ 2236/tonne, down by 3.2% QoQ however up by
17.3% YoY whereas aluminium was US$ 1968/tonne, down by 1.0%
QoQ however up by 11.2% YoY. Depreciating rupee partially negated
the fall witnessed in LME prices.
ƒ EBITDA margins to remain flat QoQ
For the quarter under review we expect Aggregate EBITDA margins to
remain flattish QoQ (18.7% in Q3FY15 as compared to 18.8% in
Q3FY15). We expect EBITDA/tonne of SAIL to be |5000/tonne, JSW
Steel to be |8235/tonne, Tata Steel India to be |14800/tonne and Tata
Steel Europe to be US$ 46/tonne. We expect Novelis to clock an
EBITDA/tonne of US$ 320/tonne with mining majors NMDC & Coal India
are expected to report EBITDA/tonne of |2650/tonne & |245/tonne
respectively.

: Company specific view
Company Remarks
Coal India We expect coal sales of 124 MT in Q3FY15, growth of 5.8% YoY. Blended
realisations are expected at | 1375/tonne, lower by 3.1% QoQ while the
corresponding EBITDA/tonne is expected at | 245/tonne.
Graphite India We expect capacity utilization of the graphite electrodes segment at ~75% in
Q3FY15 (~70% in Q3FY14). On the back of increased capacity utilization, we
expect the topline to increase 7% QoQ. Consequently, EBITDA margins are
expected to increase by 430 bps QoQ to 14.3%.
HEG We expect capacity utilization of the graphite electrodes segment at ~75% in
Q3FY15 (~80% in Q3FY14). Hence we expect topline to decline by 12.8% YoY.
EBITDA margin is expected at 17.7%, higher by 240 bps QoQ.
Hindalco
Industries
For Q3FY15, we expect domestic operations to report total aluminium metal sales
at ~206 KT and copper metal sales at ~98 KT. EBITDA margins are expected to
increase by 77 bps QoQ to 11.3%. For Novelis, we expect rolled product sales at
785 KT with EBITDA/tonne at US$320/tonne
Hindustan
Zinc
We expect zinc sales for Q3FY15 at ~200000 tonne (higher by 0.8% YoY) with lead
sales volumes at 30,000 tonne (higher by 27.9% YoY) and silver sales at ~84000
kg (higher by 7.2% YoY). On the back of lower realisation sequentially, we expect
EBITDA margins to decrease by ~280 bps QoQ to 49.8%.
JSW Steel As a merged entity, we expect JSW Steel to report steel sales volume of 3.1 MT
for Q3FY15, which includes 0.7 MT of steel sales from JSW Ispat. We expect
topline to remain flat on account of flattish sales volume both QoQ as well YoY.
EBITDA margins are expected to decline ~140 bps sequentially to 18.7%.
NMDC We expected iron ore sales of 6.3 MT in Q3FY15 (7.3 MT in Q3FY14). Export sales
are estimated at 0.5 MT in the quarter. For the quarter under review we expect
NMDC to report blended realizations of | 4126/tonne, decline of 1.9% QoQ on
account of price cut taken by the company EBITDA margins are expected to
decrease 740 bps YoY at 60% on account of muted realizations and volumes.
SAIL We expect steel sales volumes for Q3FY15 at 3.2 MT and blended realizations to
remain flat QoQ at ~|39500/tonne. On account of improved operational efficiency,
we expect EBITDA margins to increase by 110 bps QoQ. to 12.5% while
EBITDA/tonne is expected to be | 5000/tonne.
Sesa-Sterlite For Q3FY15 we expect Sesa Sterlite to report muted realisations due to lower
prices at LME sequentially. Cairn India is also likely to report muted performance
on account of subdued crude oil prices . Subsequently we expect EBITDA margins
to decline by 180 bps QoQ to 30.7%
Tata Steel For Q3FY15, we expect Tata Steel India to report steel sales of 2.3 MT. For the
standalone entity, blended realisations are expected to remain flat QoQ. On account
of improved operational efficiency we expect EBITDA margins to increase by 140
bps QoQ to ~30.1%. Tata Steel Europe is expected to report steel sales of 3.3 MT
and EBITDA/tonne of US$46. On a consolidated basis, we expect EBITDA margins
to increase 30 bps YoY at 11.2%.
Source: ICICIdirect.com Research

LINK
http://content.icicidirect.com/mailimages/IDirect_ConsolidatedPreview_Q3FY15.pdf