Accumulate Sesa Goa; target of Rs 178: Dolat Capital

Dolat Capital is bullish on Sesa Goa and has recommended accumulate rating on the stock with a target of Rs 178 in its October 26, 2012 research report.

“Sesa continues to be impacted by the regulatory uncertainty in the Indian iron ore industry. We believe that its iron ore operations in Karnataka (falls in B Category mines where Supreme court and has not yet given permission to operate and expiry of mining lease in October) and Goa (MOEF clearance and Supreme Court approval awaited for restarting the mines) can remain suspended for longer period of time (We have assumed no iron ore sales in H2FY13).”

“Net sales for Sesa fell by 63.2%YoY/83.3%QoQ to ` 2.88bn whereas it reported marginal EBITDA loss of ` 1mn (DCe: ` 400mn) due to poor performance of iron ore division. Realization of iron ore declined by 55.6%YoY/63.4%QoQ to USD 35.6 per tonne (DCe: USD 80 per tonne) as it sold 0.12 mn of its iron ore to domestic operations where realizations are lower. Sesa PAT (pre Cairn) declined by 71%YoY/75%QoQ to ` 576mn whereas post Cairn associate profit it declined by 45.8% QoQ to ` 5.22bn (YoY no.s not comparable)”

“Post the merger of Sterlite Industries, iron ore business will only contribute 7- 8% of the consolidated EBITDA and its valuations (Sesa Sterlite) will be driven by the performance of its Oil, Zinc and Aluminum business. We have arrived at a valuation of Rs 178 per share for Sesa Sterlite based on SOTP and maintain our Accumulate rating on the stoc,” says Dolat Capital research report.

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