Subscribe to SAIL OFS, says Microsec
Microsec has come out with its report on Steel Authority of India (SAIL) offer for sale (OFS) issue. According to the research firm, the stock is trading at attractive valuations as compared to its domestic peers, which possess an average P/E of 13.6x. One can subscribe to this OFS.
March 22, 2013 / 11:42 IST
Microsec has come out with its report on Steel Authority of India (SAIL) offer for sale (OFS) issue. According to the research firm, the stock is trading at attractive valuations as compared to its domestic peers, which possess an average P/E of 13.6x. One can subscribe to this OFS.
SAIL is the largest steel producer in India, with ~20 percent market share. Its current capacity of 13MTPA is vertically integrated from mines to finished steel and is spread across four plants in the mineral-rich belt of Chhattisgarh, Orissa and Jharkhand. SAIL is totally self sufficient in iron ore (captive mines). Government of India proposes to sell 24.04 cr equity shares of face value of INR10/- each, representing 5.82 percent of the total equity share capital of the company. At the floor price of INR63 per share, the government will be able to raise around INR1514 cr through the issue. We recommend a "SUBSCRIBE" to the stock at the floor price of INR63 per share. The stock is trading at attractive valuations as compared to its domestic peers, which possess an average P/E of 13.6x. We believe that risk reward is very favorable at current valuations with key triggers being company planning a capex of INR70000 cr for doubling the capacity from 13MT to 24MT of which major expansion of INR62000 cr is likely to be completed by FY14e, hike in steel prices leading to improved realizations, improvement in steel demand scenario and softening of coking coal prices.Valuation on TTM BasisSAIL Ltd is trading at almost near to its 5-year historic low of INR55 per share. We believe that risk reward is very favorable at current valuations with key triggers being company planning a capex of INR70000 cr for doubling the capacity from 12MT to 24MT of which major expansion of INR62000 cr is likely to be completed by FY14e, hike in steel prices leading to improved realizations, improvement in steel demand scenario and softening of coking coal prices.At CMP of INR64 per share, SAIL is trading at a P/E multiple of 8.01x its TTM EPS of INR7.99 and EV/EBITDA of 6.84x its TTM EBITDA of INR5377 crore.At the floor price of INR63 per share, which is at 1.59 percent discount on the closing price of 21st March, 2013 (INR64 per share), the stock trades at a P/E multiple of 7.88x its TTM EPS of INR7.99 and EV/EBITDA of 6.76x its TTM EBITDA of INR5377 crore.We recommend a "SUBSCRIBE" to the stock at the floor price of INR63 per share. The stock is trading at attractive valuations as compared to its domestic peers, which possess an average P/E of 13.6x.Also Read: Avoid subscribing to SAIL OFS, says Angel BrokingDisclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.To read the full report click on the attachment 
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