Sesa Sterlite - Multiple Businesses Ramping Up; Result Update Q3FY15 ::Edelweiss

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Sesa Sterlite’s (SSLT) Q3FY15 consolidated EBITDA of INR61.5bn (down 5% YoY, 3% QoQ) was broadly in line. Outperformance was logged by aluminium (high volumes, low cost), zinc international (high realisations), Hindustan Zinc (low cost) and copper segments (high volumes, Tc/Rc), while oil & gas (Cairn India) and power businesses disappointed. Going ahead, ramping up of its multiple capex projects will boost volumes across segments. However, factoring in low commodity prices (crude oil, aluminium) and their subdued outlook, we prune FY15/16E consolidated EBITDA ~9%/20%. We introduce FY17E EBITDA with growth of 6% YoY.

EBITDA broadly in line; PAT beat on lower interest and tax rates

Aluminium segment’s margins rose ~23%% QoQ on improved domestic coal availability, while copper business benefitted from strong Tc/Rc charges and high capacity utilisation. Hindustan Zinc’s (HZL) cost reduced 11% QoQ. Oil & gas business EBITDA margin fell 8% tracking low crude oil prices and disappointment in power was on account of high cost at the newly commissioned Talwandi Saboo unit. While consolidated EBITDA was broadly in line, low finance cost and tax rate (~14% versus estimated 20%) led to PAT being ~10% above estimate.

Volume growth ahead

HZL’s mined metal production is expected to stay high as per the mine plan. Iron ore mining leases have been renewed at Karnataka and Goa, and production is expected to commence soon. In aluminium, while the newly commissioned pot lines are ramping up well, the 660MW power plant at Talwandi Saboo was commissioned in Q3FY15.

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https://www.edelweiss.in/research/Sesa-Sterlite--Multiple-Businesses-Ramping-Up;-Result-Update-Q3FY15/28212.html