Angel Broking neutral on SAIL

“For 3QFY2012, SAIL’s sales volumes were below our estimates, while its PAT was higher-than-our expectations due to lower-than-expected raw material costs. We maintain our Neutral rating on the stock.”

“During 3QFY2012, SAIL’s net sales decreased by 4.9% yoy to Rs10,594cr (below our estimates of Rs12,239cr) mainly due to lower sales volumes (-19.4% yoy to 2.6mn tonnes), partially offset by increase in realizations (+17.9% yoy to Rs40,435/tonne). Despite 17.9% yoy growth in realization, EBITDA dipped by 10.3% yoy to Rs1,581 mainly due to higher power and fuel (up 27.1% yoy). The company reported an exceptional item related to forex loss of Rs466cr in 3QFY2012. Hence, reported PAT decreased by 42.9% yoy to Rs632cr. However, excluding exceptional items, adjusted PAT grew by 2.2% yoy to Rs1,098cr (in-line with our estimate of Rs1,083cr) during 3QFY2012. SAIL has delayed the commissioning of integrated brownfield expansion in Bokaro of 1mn tonnes and Rourkela of 2mn tonnes by two quarters to 1QFY2013 and 4QFY2013, respectively.”

“SAIL is expected to increase its saleable steel production capacity from 12.5mn tonnes to 23.1mn tonnes by FY2015. However, the company has reported delays and cost overruns in most of its expansion plans. The stock is currently trading at an EV/EBITDA of 10.2x FY2012 and 8.2x FY2013, a significant premium to its peers. Given the modest volume growth in the near term and fair valuations, we maintain our Neutral view on the stock,” says Angel Broking research report.

Public holding more than 90% in Indian cos

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