MOSL: SAIL (Neutral)-Operating efficiencies kicks in, but sales sluggish-Volume growth, operating leverage key drivers
SAIL: Operating efficiencies kicks in, but sales sluggish; Volume growth, operating leverage key drivers; Maintain Neutral
(SAIL IN, Mkt Cap USD2.8b, CMP INR49, TP INR52, 8% Upside, Neutral)
SAIL's 3QFY19 EBITDA increased 9% QoQ (+66% YoY) to INR25.8b (v/s our est. of INR14.4b) on expansion of spreads (realization - raw material cost). EBITDA per ton was up INR1,159/t QoQ to INR7,965/t, primarily due to operating efficiencies and leverage. Adj. PAT increased 10% QoQ to INR6.3b (v/s our est. of INR1.2b loss).
- Steel sales declined 7% QoQ (down 14% YoY) to 3.2mt hurt by volatility in steel prices in the latter part of the quarter. Production, however, was robust and increased 7% QoQ (+5% YoY) to 3.8mt, thus providing operating leverage. Inventories increased massively by INR21b (~300kt).
- Steel realization increased 2% QoQ on better mix in lower sales volumes, despite price volatility. Spreads increased by INR3200/t QoQ despite coking coal cost increasing by INR500/t. Lower coke rate (INR2.5b savings), better product mix and efficiencies were key drivers for the spreads.
- Higher spreads and INR1.5b lower forex losses boosted EBITDA per ton QoQ.
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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