MOSL: SAIL (Sell)-Losses remain high-Net debt will continue to rise eroding equity value
​SAIL: Losses remain high; Net debt will continue to rise eroding equity value; Maintain Sell
(SAIL IN, Mkt Cap USD3.8b, CMP INR57, TP INR30, 47% Downside, Sell)
- SAIL's reported EBITDA loss declined from INR2.6b in 4QFY17 to INR0.8b in 1QFY18. However, adjusting for the prior period sales of INR2.5b and prior period employee cost reversal of INR1.7b, the adjusted EBITDA loss stood at INR5b as against estimate of INR5.6b. Finance cost was down 1% YoY/18% QoQ to INR5.9b, even as debt rose 18% YoY/3% QoQ to INR426b. Loss after tax increased from INR7.7b in 4QFY17 to INR8b in 1QFY18.
- Steel sales grew 8% YoY / -12% QOQ to 3mt. Production was down 6% YoY / 12% QoQ to 3.2mt.
- Realization, adjusting for prior period item, increased 2% QoQ to INR37,423/t (beat 7%) on higher long-product prices.
- EBITDA per ton, adjusted for the prior period items, loss increased INR888 QoQ to INR1,655.
- Amid weak profitability and financial health, SAIL has cut executive benefit of INR1.7b relating to the period April 2015 to December 2016. This was recorded as reversal in the employee expenses in 1Q. On the other hand, it has provided ~INR1b for the on-going wage hike negotiations.
Steel Authority of India is principally engaged in the manufacturing iron and steel, both basic and special steels, for domestic construction, engineering, power, railway, automotive and defense industries and for sale in export markets. Co. steel products includes hot metal, crude steel, pig iron, cold rolled sheets and coils, galvanized sheets, electrical sheets, structural, railway products, plates, bars and rods, stainless steel and other alloy steels. Co. operates predominantly in India.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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