Angel Broking has maintained neutral rating on Bhushan Steel, in its January 22, 2013 research report.
Angel Broking has maintained neutral rating on Bhushan Steel , in its January 22, 2013 research report.
“For 3QFY2013, Bhushan Steel (Bhushan) reported a modest growth in top-line; however, its bottom-line declined 20.0% yoy due to higher depreciation and interest costs. We maintain our Neutral view on the stock.”
“During 3QFY2013, Bhushan’s net sales grew by 3.8% yoy to Rs2,405cr mainly on account of higher volumes, which however were partially offset by lower realisations. Flat products’ sales volumes increased by 11.6% yoy to 482,949 tonne, while long products’ sales volumes declined by 8.8% yoy to 75,702 tonne in 3QFY2013. However, average gross realizations declined 2.9% yoy to Rs49,034/tonne. EBITDA increased by 8.0% yoy to Rs782cr mainly driven by other operating income which grew by 38.2% yoy to Rs124cr. EBITDA/tonne stood at Rs13,994 in 3QFY2013 compared to Rs14,039 in 3QFY2012. Depreciation expense increased 36.8% yoy to Rs207cr on account of increased capacity. Interest expenses also increased 27.9% yoy to Rs293cr due to increase in debt. Consequently, reported net profit decreased by 20.0% yoy to Rs221cr.”
“We expect Bhushan to complete phase III expansion during 4QFY2013, the benefits of which will be witnessed during FY2014-15. However, we remain concerned over its high leverage (2.6x for FY2013E and 2.3x for FY2014E). Further, at the current market price, the stock is trading at 9.6x FY2013E and 7.3x FY2014E EV/EBITDA, ie at a significant premium over its peers. Hence, we maintain our Neutral view on the stock,” says Angel Broking research report.
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