MOSL: SAIL (Neutral)-Operational miss on volumes pressure-Lower realizations to seep in
SAIL: Operational miss on volumes pressure; Lower realizations to seep in
(SAIL IN, Mkt Cap USD2.1b, CMP INR37, TP INR34, 8% Downside, Neutral)
EBITDA declined 29% QoQ (-39% YoY) to INR15.8b (our estimate: INR17b) in 1QFY20 due to lower sales volumes (3.2mt v/s our estimate of 3.9mt). EBITDA per ton was down by INR490 QoQ to INR4,869 owing to operating deleverage/lower fixed cost absorption. Adj. PAT declined 85% QoQ to INR0.7b, exceeding our estimate of INR0.5b led by higher other income (+87% YoY to INR1.8b).
- Sales volumes were down 21% QoQ (-1% YoY) to 3.2mt, given subdued market conditions and a conscious effort to protect product margins, in our view. Crude steel production was also curtailed (-9% QoQ) to 3.93mt. We expect volumes to recover in 2HFY20 as demand/pricing conditions improve.
- Realizations surprised positively (+2% QoQ), led by a better product mix, in our view. Product spreads increased 12% QoQ to INR24,841. Other expenses (ex-staff cost) per ton, however, were significantly higher sequentially at ~INR1,160 QoQ, given lower volumes.
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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