Brokerage house Emkay Global Financial Services is bearish on Steel Authority of India (SAIL) and has recommended sell rating on the stock with a target price of Rs 62 in its August 13, 2014 research report.
Emkay's research report on Steel Authority of India (SAIL)
Substantial decline in tax expenses, owing to MAT credit, coupled with improved operational performance resulted in APAT of Rs 5.3 bn, up 17% QoQ and down 2% YoY
EBITDA stood at Rs 11.3 bn, higher than our estimate on negative stock adjustment and improved operational efficiency; EBITDA/ tn at Rs 4,100 (+11% YoY; +17.1% QoQ)
Revenue at Rs 113.4 bn was in line with our estimates; Avg realizations rose 5%/ 6.5% on YoY/ QoQ, while volume came in line at 2.8 mt. The company holds 1.32 mt of inventory
While, higher volume is already priced in, significant improvement margins looks difficult
At the CMP of Rs 83, the stock trades at 10.2xFY16 EPS and 9.1xFY16 EV/EBITDA. Continue to value the stock at 5.5xFY16 EV/ EBITDA and giving 20% discount to the CWIP, the fair value comes at Rs 62/ share. Though, some signs of improvement has been there, it would be too early however to assume significant and sustained jump from here on both in terms of volume and margins. Maintain sell with a revised target price of Rs 62", says Emkay Global Financial Services research.
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