Reduce SAIL; target of Rs 59: Arihant capital

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.

August 06, 2015 / 04:55 PM IST
 
 
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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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first published: Feb 26, 2015 12:54 pm

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