Metals and Mining stocks results preview for Q3FY12: Emkay

The increase is essentially because of enhanced volumes and slightly better realizations at JSW Steel, Sterlite Industries and Bhushan Steel. The sharp fall in LME (12% to 18%), Silver (18%) and steel (5%) realizations during Q3 was to some extent offset by the depreciating INR (13%) giving 5% QoQ decline. The major contributors of YoY growth are expected to be JSW Steel (30%), Bhushan Steel (15%) and Sterlite (12%) while Sesa Goa is expected to decline by 8% on account continued mining ban in Karnataka. On QoQ basis major declines in revenues are expected at Bhushan (10%), Sterlite (9%) and Tata Steel (8%) while Sesa would show an increase of 162% due to the seasonal impact in second quarter (monsoon).

The EBITDA performance for the universe is expected to take a dip of 11% on a YoY basis and 2% QoQ. The major declines on YoY are expected in Tata Steel (38%) and Sesa Goa (24%) primarily due to pressure on input costs and export duties (for Sesa Goa). Despite the phenomenal growth in Sesa Goa’s EBITDA (+3515%), the EBITDA of metals universe is expected to be flat QoQ because of decline in Tata Steel (23%), JSW Steel (21%), Bhushan (10%) and Sterlite (9%) due to domestic input cost pressures.

The PAT is expected to witness a decline of 24% on a YoY basis. However, due to extraordinary increases in PAT at JSW Steel and Sesa Goa, the universe is expected to grow by 30% on a QoQ basis. Sterlite and HZL are the only companies to post a YoY growth, highest decline being at Tata Steel (-68%). On QoQ basis, PAT for Sesa Goa is expected to increase significantly due to the seasonal impact in second quarter, while for JSW Steel is expected to report a positive number after a bad quarter of negative PAT due to losses on account Ispat and INR depreciation.

Developments on the iron ore auction mining ban in Karnataka, Shah Commission study in Goa, low LMEs and continued depreciation of the Indian currency are likely to have significant impact on the Q4 FY12 performance.

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