SAIL Q1 net sales seen up 9% to Rs 11,809 cr

By Nigel D'Souza, Research Analyst at CNBC-TV18

State-owned steel manufacturer Steel Authority of India (SAIL) is set to declare its numbers for the quarter ended June 2012. Analysts on an average expect the profit after tax to go up by 17.8% year-on-year to Rs 987 crore in the first quarter of financial year 2012-13, but that is likely to fall by 37.4% quarter-on-quarter. PAT has not included forex loss. In Q4FY12, the company had reported a forex gain of Rs 724 crore as against forex loss of Rs 466.5 crore in the previous quarter. Net sales are seen going up by 9% to Rs 11,809 crore from Rs 10,811 crore and earnings before interest, tax, depreciation and amortisation (EBITDA) are likely to go up by 28% to Rs 1,529 crore from Rs 1,196 crore during the same period.
 
EBITDA margin is seen rising by 180 basis points YoY and 110 basis points QoQ to 12.9% in the April-June quarter. On quarter-on-quarter basis, net sales are expected to fall by 11.9% and EBITDA by 3%. Profit after tax  Analysts expect topline to be driven by higher realizations, but volumes are likely to be flat YoY: Net sales are expected to increase largely due to higher realizations. But sales volumes are likely to remain flat YoY but decline 12-13% on a QoQ basis. Average realizations will come in higher on a QoQ and will be supported by a depreciating rupee. Steel volumes have been strong in April and May but higher imports (attributable to a sudden decline in global steel prices) have negatively impacted June volumes across companies. SAIL is likely to have been impacted the most Margins improvement is likely on account of higher realizations and lower coking coal prices: EBIDTA per tonne is likely to increase sequentially given price hike taken by steel makers in India especially long products and softened coking coal prices. Long products constitute roughly 42-45% of its volumes. PAT will be hit by forex losses and also lower other income: Analysts feel other income is likely to decline on lower level of cash and cash equivalents. SAIL is increasingly using its cash balance to repay debt and fund capex. Investors should watch out for progress on its on-going expansion plans.