CRISIL assigns valuation grade of 5/5 to Electrosteel

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CRISIL assigns valuation grade of 5/5 to Electrosteel

CRISIL Research has come out with its report on Electrosteel Castings. The research firm has maintained the fundamental grade of 3/5 to the company in its January 23, 2012 report.

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CRISIL Research has come out with its report on Electrosteel Castings . The research firm has maintained the fundamental grade of 3/5 to the company in its January 23, 2012 report.

Electrosteel Castings Ltd's (Electrosteel's) Q3FY12 revenues were marginally higher than CRISIL Research's expectations while profit adjusted for forex was significantly higher. The company reported forex loss of Rs 670.3 mn due to which it reported loss at the PAT level. We will revisit our estimates post interaction with the management. We maintain our fundamental grade of 3/5.

Q3FY12 result analysis
• Electrosteel's Q3FY12 revenues increased by 8.1% y-o-y (flat q-o-q) to Rs 4.7 bn. We are awaiting volume and pricing details from the management.

• The company reported EBITDA loss of Rs 11 mn due to forex loss of Rs 670.3 mn (booked under other expenses) in Q3 as the company financed import purchase through buyer's credit. Adjusted for losses EBITDA declined by 25% y-o-y (5.7% q-o-q) to Rs 659 mn while EBITDA margin declined by 615 bps y-o-y (89 bps q-o-q) to 13.9%.

• The interest and financing charges (net) declined by 10% y-o-y (~26% qo-q) while the other income increased to Rs 76 mn from Rs 11 mn in Q3FY11 and Rs 34 mn in Q2FY12.

• Adjusted PBT declined by 21.4% y-o-y (increased by 9.2% q-o-q) to Rs 490 mn.

• The company capitalised Rs 543.8 mn on loss incurred on long term foreign currency loans on account of exchange difference under the Companies Amendment Rules, 2011.

Valuation: Current market price has strong upside
We continue to use the sum-of-the-parts method to value Electrosteel and maintain the fair value estimate at Rs 35 per share. At the current market price of Rs 18, the valuation grade is 5/5. We may revisit the valuation post interaction with the management.

To read the full report click on the attachment

Disclaimer: This report (Report) has been commissioned by the Company/Investor/Exchange and prepared by CRISIL. The report is based on data publicly available or from sources considered reliable by CRISIL (Data). However, CRISIL does not guarantee the accuracy, adequacy or completeness of the Data / Report and is not responsible for any errors or omissions or for the results obtained from the use of Data / Report. Opinions expressed herein are CRISIL's opinions as on the date of this Report.  The Data / Report are subject to change without any prior notice. Nothing in this Report constitutes investment, legal, accounting or tax advice or any solicitation, whatsoever. The Report is not a recommendation to buy / sell or hold any securities of the Company. CRISIL especially states that it has no financial liability, whatsoever, to the subscribers / users of this Report. This Report is for the personal information of the authorized recipient only. This Report should not be reproduced or redistributed or communicated directly or indirectly in any form to any other person or published or copied in whole or in part especially outside India, for any purpose.

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