Sell Sesa Goa; target Rs 153: Dolat Capital

52776 Investors following Sesa Goa. Share this News with them.

0

Like this story, share it with millions of investors on M3

Sell Sesa Goa; target Rs 153: Dolat Capital

Dolat Capital is bearish on Sesa Goa and has recommended sell rating on the stock with a target price of Rs 153 in its January 3, 2012 research report.

Post your opinion here

 

0

Tweet

Share on Tumblr

RELATED NEWS Hits and misses of 2011: Maximus Securities Buy Sesa Goa; target Rs 195: Angel Broking Buy Indraprastha Gas; target Rs 414: Firstcall Research ALSO READ See previous views by Dolat Capital See what other Experts & Brokerages are saying about Sesa Goa See messages about Sesa Goa Sesa Goa BSE | NSE 01/06/12 Are Mutual Funds betting on Sesa Goa? Other Stocks in this news NMDC |

Dolat Capital is bearish on Sesa Goa and has recommended sell rating on the stock with a target price of Rs 153 in its January 3, 2012 research report.

"Government of India has notified increase in export duty from 20% to 30% on iron ore fines and lumps. The hike will be effective December 30, 2011 and would impact Sesa Goa and NMDC adversely. Govt has last increased the duty from 5% to 20% in the Union budget 2011-12 affecting the industry adversely. This increase in export duty would reduce the effective realizations for the iron ore miners by 10% (in case of domestic sales) or increase the cost by the similar amount in the case of exports."

"We reduce our earnings (before profits from Cairn) by 5.5% and 27.8% in FY12E and FY13E respectively due to hike in export duty. Spot Iron ore prices have also corrected by 23% yoy. We expect the realisations to fall by the same level for FY13E to fall in line. We have revised our EBITDA estimates by 5.6% and 25.4% in FY12E and FY13E to factor in the increase in export duty We believe the overhang on the sector shall continue. Especially, if the MMDR act is implemented which seeks to double the current royalty at 10% to 20% will further decrease our EBITDA and earnings estimates by 19% and 21.5% respectively."

"Justice M.B Shah Commission is expected to submit its report on illegal mining of iron ore in Goa, which may propose ban on exports of iron ore. It has found various irregularities relating to mining outside the lease, underpayment of royalty to the state government, dumping of waste outside the mining lease and other forest issues. Goa exported 54 mn tonnes in FY11 and accounted for 60% of India's iron ore exports. Goa iron is low grade and is primarily exported. We believe if the exports of iron ore are implemented, it will virtually halt the Sesa Goa operations as there is no demand for low grade ore in India."

"We believe that with the current slowdown in demand for steel and hence iron ore in China, spot iron ore prices will remain under pressure. We believe given the current regulatory overhangs regarding the implication of the Shah commission report , weak iron ore pricing environment and the imposition of additional royalty due to MMDR act, Sesa Goa will remain under pressure. We change our rating from Reduce to Sell on the stock with a price target of Rs 153 (2.5x FY13 EV/EBITDA, Rs 91 per share for the holding in Cairn, valuing it at 30% discount to current market price)," says Dolat Capital research report.

Shares held by Mutual Funds/UTI

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.

To read the full report click on the attachment