Angel Broking neutral on Sesa Goa

“For 3QFY2012, Sesa Goa (Sesa) reported net sales growth of 16.3% yoy. However, the company’s adjusted PAT declined by 18.4% yoy mainly on account of higher export duty.”

“For 3QFY2012, Sesa’s net sales increased by 16.3% yoy to Rs2,617cr, mainly due to increased iron ore sales volumes to 5.0mn tonnes (+5.4% yoy) as well as increased realization to US$94 (+10.0% yoy). Despite 16.3% yoy growth in net sales, EBITDA declined by 11.8% yoy to Rs1,085cr, mainly on account of higher export duty. Interest expense increased by 444.4% yoy to Rs73cr. Hence, reported PAT decreased by 35.5% yoy to Rs692cr. The company reported exceptional item of Rs178cr related to forex loss during the quarter. Sesa also reported share of profit from its associate (Cairn India) of Rs122cr. Excluding exceptional items, adjusted PAT declined by 18.4% yoy to Rs870cr (above our estimate of Rs562cr).”

“We expect Sesa’s margins to decline in FY2013 on account of higher iron ore export duty to 30% effective 4QFY2012 (prior to 4QFY2012, duty stood at 20%). We believe the current stock price discounts negatives such as acquisition of a minority stake in the unrelated oil business via acquisition of Cairn India’s stake, increased export duty and railway freight and lower volumes from Goa mines. However, there is an overhang of mining ban in Karnataka and potential mining ban in some of the Goa mines. Thus, we recommend Neutral on the stock,” says Angel Broking research report.  

Public holding more than 90% in Indian cos

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