Accumulate Sesa Goa; target of Rs 206: Angel Broking

Angel Broking is bullish on Sesa Goa and has recommended accumulate rating on the stock with a target of Rs 206 in its April 24, 2012 research report.

“For 4QFY2012, Sesa Goa’s (Sesa) net sales and EBITDA declined by 22.6% and 52.7% yoy, respectively. However, the company’s adjusted PAT declined by only 16.0% yoy due to income from share of profit from associate. We recommend Accumulate on the stock.”

“For 4QFY2012, Sesa’s net sales decreased by 22.6% yoy to Rs2,794cr, lower than our estimate of Rs3,006cr, on account of lower iron ore sales volumes (down 21.2% yoy) and realizations (down 12.4% yoy) during the quarter. Export duty increased by 103.4% yoy to Rs742cr in 4QFY2012, as the government had raised export duty on iron ore to 30% from January 2012. Thus, EBITDA declined by 52.7% yoy to Rs997cr and EBITDA margin slipped by 2,266bp yoy. Sesa reported share of income from associate (Cairn India) of Rs466cr during 4QFY2012. Excluding exceptional items and including share of profit from associates, adjusted PAT decreased by 16.0% yoy to Rs1,228cr (in-line with our estimate of Rs1,247cr).”

“We expect Sesa’s operating margin to decline by 752bp yoy in FY2013 on account of higher iron ore export duty to 30%, which was effective from 4QFY2012 (prior to 4QFY2012, duty stood at 20%). However, considering the ongoing process of group restructuring by the promoter, Vedanta Resources, valuation of Sesa will mirror the valuation of consolidated company, Sesa Sterlite. We value Sesa Sterlite business at Rs206, based on the SOTP methodology, and recommend Accumulate on the stock,” says Angel Broking research report.  

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