Arihant capital markets has recommended a reduce rating on Steel Authority of India (SAIL) with a target price of Rs 59, in its research report dated February 24, 2015.
Arihant capital markets' report on Steel Authority of India (SAIL)
"SAIL’s Q3FY15 result was below expectation with company reporting profit after tax of Rs 579cr, an increase of 12.3% on YoY basis. Sales volume was 2.86mn tonnes (down 2.6% QoQ and 4.7% on YoY). Blended realizations (calculated) was down 2.6 qoq at Rs 38,383 per tonne, while on yoy basis it increased by 1.3%. Consequently revenues declined 3.4% yoy and 5.1% QoQ to Rs 10,977cr. Operating cost/ton decreased 1.8% QoQ to Rs 34,613. Raw material prices remain soft during the quarter. Power & fuel cost decreased from Rs 5,026/t to Rs 4,723/t. Employee expenses declined marginally to Rs 8,043/t from Rs 8,056/t. However other expenses increased to Rs 7,805/t from Rs 7,472/t. EBITDA margin declined by 57 bps QoQ to 10.9%."
"Going forward we forecast imports from China/ CIS to increase. As prices of iron ore and coking coal continues to remain soft, margins for SAIL may improve. Timely completion of its expansion, up-gradation and modernization program remains the key. We have valued stock on EV/EBITDA(x) of 5.5(x) its FY16E estimate and have arrived at a fair value of Rs 59 per share. At CMP of Rs 74 the stock is trading at EV/EBITDA(x) of 6.4x FY16 estimates at which stock looks over valued. We have “Reduce” rating on the stock", says Arihant capital markets research report.
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