EUR 4.27 For Business Accounts Only

International Steels (ISL): 3QFY19 EPS Rs1.41, -42% YoY; -46% QoQ; (In line with expectations)

 

• International Steels (ISL) posted 42% YoY decline in its earnings to Rs1.4/share during 3QFY19, in line with our expectations, on back of significant discounts on its CR products amidst lower pricing power. To recall, company was offering hefty discounts to the tune of 5% per ton value of CR to carve out importers from the market.
• Gross margins during 3QFY19 clocked in at 9.9% (13-Quarter low), slightly lower than our expectations of 10.6%. Lower margins could be attributed to the reasons mentioned above and greater focus of the company on exports (relatively lower margin market).
• Net sales of ISL improved by 25% YoY as the company sold around 150-155k tons of flat steel products.
• Finance cost was up 232% YoY due to increase in interest rates and debt borrowings of the company. Further, the Company has also started expensing its mark up expense on long term debt for new line, which was previously being capitalized.
• Effective tax rate for the quarter was 24%, taking 9MFY19 tax rate to 16%. Lower 9MFY19 taxation is on back of tax rebates availed in 2QFY19. After normalization of tax rate, 9MFY19 earnings would have been around Rs4.77, down 36% YoY.
• We flag 1) downward revision in duty structure, 2) volatility in commodity prices, 3) dumping from countries not protected by anti-dumping duties, & 4) devaluation beyond our assumptions, as key risks.