MOSL: SAIL (Neutral)-Operational miss on lower realization, higher cost
SAIL: Operational miss on lower realization, higher cost
(SAIL IN, Mkt Cap USD2.1b, CMP INR36, TP INR34, 6% Downside, Neutral)
EBITDA was down 27% QoQ at INR11.6b (our estimate: INR6b) in 2QFY20 due to a 2% QoQ decline in realization to INR44,883/t (our estimate: INR42,652). As a result, EBITDA/ton declined 24% QoQ to INR3,684. Sales volumes were also down 3% QoQ to 3.1mt (our estimate: 3.2mt). SAIL reported a loss of INR5.2b at the PBT level and INR3.4b at the PAT level (our estimate: loss of INR10b).
- Revenue was down 5% QoQ at INR141b (our estimate: INR136b) due to slightly lower volumes and realizations.
- Reported EBITDA declined 27% QoQ to INR11.6b, which included INR4.3b of revenue booked on higher price finalized for prior-period sales of rails to the Indian Railways. Excluding this benefit, EBITDA was down 54% QoQ to INR7.3b (our estimate: INR6b).
- Sales volumes declined 3% QoQ to 3.1mt due to subdued market conditions. Crude steel production was about flat QoQ at 3.9mt. We expect volumes to recover in 2HFY20 as demand improves.
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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