Tata Sponge Iron Ltd. (TSIL) reported marginally lower revenue on a yoy basis at
`174cr in 2QFY2012 as compared to `176cr in 2QFY2011 on the back of
hampered sponge iron production due to iron ore supply issues. This was partially
offset by increased sponge iron realization. However, EBITDA margin expanded
by 802bp yoy from 9.2% in 2QFY2011 to 17.2% in 2QFY2012 on account of a
decline in raw-material cost as a percent of sales. PAT increased by 109% yoy to
`22cr in 2QFY2012 as compared to `10cr in 2QFY2011. We continue to
maintain our Buy recommendation on the stock.
Increased volumes to aid revenue growth: We expect TSIL to post a 16% CAGR in
its revenue over FY2011-13E to `794cr in FY2013E due to resumption in sponge
iron production and sales volume. The company gets assured supply of iron ore
from Tata Steel, which insulates it from the price volatility in the spot market. TSIL
has a 45% stake in Talcher coal block in Radhikapur, with estimated reserves of
120mn tonnes. Progress on the pending forest clearance for the block could be a
trigger for the stock.
Outlook and valuation: We expect TSIL to post a 16% CAGR in its revenue over
FY2011-13E, while its EBITDA margin is expected to contract by 508bp from
22.2% in FY2011 to 17.1% in FY2013 due to increasing raw-material costs. PAT
is expected to decline to `92cr in FY2013E from `101cr in FY2011. The stock is
trading at a PE of 5.1x FY2013E earnings and P/B of 0.7x for FY2013E.
We maintain our Buy recommendation on the stock with a target price of `382,
based on a target P/B of 0.9x for FY2013E
`174cr in 2QFY2012 as compared to `176cr in 2QFY2011 on the back of
hampered sponge iron production due to iron ore supply issues. This was partially
offset by increased sponge iron realization. However, EBITDA margin expanded
by 802bp yoy from 9.2% in 2QFY2011 to 17.2% in 2QFY2012 on account of a
decline in raw-material cost as a percent of sales. PAT increased by 109% yoy to
`22cr in 2QFY2012 as compared to `10cr in 2QFY2011. We continue to
maintain our Buy recommendation on the stock.
Increased volumes to aid revenue growth: We expect TSIL to post a 16% CAGR in
its revenue over FY2011-13E to `794cr in FY2013E due to resumption in sponge
iron production and sales volume. The company gets assured supply of iron ore
from Tata Steel, which insulates it from the price volatility in the spot market. TSIL
has a 45% stake in Talcher coal block in Radhikapur, with estimated reserves of
120mn tonnes. Progress on the pending forest clearance for the block could be a
trigger for the stock.
Outlook and valuation: We expect TSIL to post a 16% CAGR in its revenue over
FY2011-13E, while its EBITDA margin is expected to contract by 508bp from
22.2% in FY2011 to 17.1% in FY2013 due to increasing raw-material costs. PAT
is expected to decline to `92cr in FY2013E from `101cr in FY2011. The stock is
trading at a PE of 5.1x FY2013E earnings and P/B of 0.7x for FY2013E.
We maintain our Buy recommendation on the stock with a target price of `382,
based on a target P/B of 0.9x for FY2013E
Does this theme has to do with your professional status or perhaps is it mostly about your hobbies and kinds of spending your free time?
ReplyDelete