SAIL an underperformer: Way2Wealth

“SAIL has reported 23% volume growth q-o-q for Q4FY12 due to improved volume from Bhilai and Bokaro plants. Sales volume from Bhilai steel plant increased from 0.9mnt to 1.1mnt q-o-q. Realisation during the quarter increased marginally by 2.5% at Rs41865/t. Raw material cost during the quarter increased by 5% q-o-q due to increased coking coal prices. The firm has taken hit from increased imported coking coal prices as well as from Coal India. Employee cost during the quarter remained stable. This has put pressure on margin of the company which has gone down from Rs6000/t to 5800/t q-o-q. Operating margin during the quarter has gone down from 15% to 14% q-o-q. The firm posted forex gain of Rs724cr. The firm reduced its debt by Rs3605cr during the quarter standing at Rs16320cr currently. Increased cape funding through internal accruals reduced cash balance from Rs8670cr to Rs5900cr q-o-q. Net Profit during the quarter stood at Rs1574cr and without exceptional item net profit is reported at Rs850cr.”

“SAIL’s profitability is challenged on many fronts like subdued volume growth, increased cost from raw materials as well as employee benefits and muted realization growth due to unsustainable demand growth. We expect SAIL to post EPS of Rs8.5 for FY13E. At current market price the stock is trading at 11x FY13E earnings. We maintain “Underperform”,” says Way2Wealth research report.      

Institutional holding more than 40% in Indian cos

Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.