X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2018 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
SAIL: Volumes remain stagnant - Views on News from Equitymaster
StockSelect
  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

SAIL: Volumes remain stagnant
Jun 12, 2015

SAIL has announced its March quarter results. The company has reported a 13.9% YoY decline in topline while bottomline has declined by 26.2% YoY for the quarter ended March 2015. Here is our analysis of the results.

Performance summary
  • Topline declines by 13.9% YoY during the quarter. During FY15 saleable steel production stood at 12.84 million tons (MT).
  • Due to a fall in topline, operating profits decline by 23.3% YoY.
  • Bottomline declines by 26.2% YoY due to poor performance at the operating level. There was a tax credit during the quarter due to adjustments relating to MAT credit and deferred tax assets/liabilities. This cushioned profits to an extent.
  • The D/E ratio stood at 0.65x at the end of FY15.
  • The board has declared final dividend of Rs 0.25 per share. This together with an interim dividend of Rs 1.75 per equity share declared earlier takes total dividend for the year at Rs 2 per share.

Financial Snapshot
(Rs m) 4QFY14 4QFY15 Change FY14 FY15 Change
Net sales 134,608 115,851 -13.9% 466,824 457,108 -2.1%
Expenditure 122,487 106,553 -13.0% 426,808 411,081 -3.7%
Operating profit (EBDITA) 12,121 9,299 -23.3% 40,016 46,027 15.0%
EBDITA margin (%) 9.0% 8.0%   8.6% 10.1%  
Other income 2,228 2,793 25.3% 8,510 9,837 15.6%
Interest (net) 3,126 4,269 36.6% 9,676 14,542 50.3%
Depreciation 5,163 5,070 -1.8% 17,167 17,733 3.3%
Profit before tax 6,060 2,752 -54.6% 21,683 23,589 8.8%
Exceptional item - - NM 10,563 - -100.0%
Tax 1,535  (590) NM 6,081 2,662 -56.2%
Profit after tax/(loss) 4,526 3,342 -26.2% 26,165 20,927 -20.0%
Net profit margin (%) 3.4% 2.9%   5.6% 4.6%  
No. of shares (m)         4,131  
Diluted earnings per share (Rs)         5.1  
Price to earnings ratio (x)*         12.0  
(* on trailing twelve months earnings)

What has driven performance in 4QFY15?
  • During FY15 the company reported sales volume of 11.7 MT, as compared to 12.1 MT in FY14. For 4QFY15, sales volume was 3.2 MT, down 5.9% YoY. The EBITDA per ton during the year came in at Rs 3,934 per ton, compared to Rs 3,307 per ton in FY14, higher by 19.0% YoY. During FY15, production of value added steel from the 5 integrated steel plants stood at 43%.

  • The production volume was flat in FY15 at 12.84 MT. On quarterly basis too, production volumes were relatively flat and stood at 3.4 MT, up marginally by 3% YoY.

  • Operating profits declined 23.3% YoY on the back of poor topline performance. This led to a margin contraction of 100 bps YoY to 8% during 4QFY15.

  • Management spent Rs 68.4 bn towards capex during FY15. For FY16, capex guidance is pegged at Rs 75 bn.

  • Net profits declined 26.2% YoY in 4QFY15 due to poor performance at the operating level. A 36.6% YoY rise in interest expenses due to increase in debt that is being taken to fund the existing expansion plan & meet working capital requirements further impacted profitability growth.
What to expect?

Performance on the top-line front was disappointing in both the current quarter and full year as sales volumes registered de-growth. However, in terms of profit the full year performance was strong after adjusting for exceptional gains of Rs 10.5 bn in FY14. Profits increased by 34.1% YoY after adjusting for exceptional gains in FY14.

The expansion plan seems pretty much on track. The ongoing capex is likely to be financed through D/E of 1:1. It shall add new products to the company's portfolio (galvanized coils/sheets, plates/pipes, products catering to railways etc) that shall help improve product mix. This is likely to boost production and sales volume in the future. The aim is to reach 21.4 MT and 20.2 MT of production capacity of crude steel and saleable steel respectively after the expansion & modernization plan is complete. So, while both the production and sales volume were flat/down in the current year they are likely to increase as demand revives in the future.

At the current price of Rs 60 the stock is trading at a multiple of 5.7x and 0.54x its FY17 earnings and FY17 book value respectively. In light of strong capacity expansion plans and reasonable valuations we maintain a BUY on the stock.

Lastly, we would like to gently remind you that your allocation to equities should be decided upon after keeping aside some safe cash. Also, within your overall exposure to equities, please ensure that you broadly follow our suggested asset allocation and that no single large cap stock comprises more than 5% of your portfolio.

To Read the Full Story, Subscribe or Sign In



DISCLOSURES UNDER SEBI (RESEARCH ANALYSTS) REGULATIONS, 2014
INTRODUCTION:
Equitymaster Agora Research Private Limited (hereinafter referred to as "Equitymaster"/"Company") was incorporated on October 25, 2007. Equitymaster is a joint venture between Quantum Information Services Private Limited (QIS) and Agora group. Equitymaster is a SEBI registered Research Analyst under the SEBI (Research Analysts) Regulations, 2014 with registration number INH000000537.

BUSINESS ACTIVITY:
An independent research initiative, Equitymaster is committed to providing honest and unbiased views, opinions and recommendations on various investment opportunities across asset classes.

DISCIPLINARY HISTORY:
There are no outstanding litigations against the Company, it subsidiaries and its Directors.

GENERAL TERMS AND CONDITIONS FOR RESEARCH REPORT:
For the terms and conditions for research reports click here.

DETAILS OF ASSOCIATES:
Details of Associates are available here.

DISCLOSURE WITH REGARDS TO OWNERSHIP AND MATERIAL CONFLICTS OF INTEREST:
  1. Equitymaster has financial interest in the subject company.
  2. Equitymaster's Associates, Research Analyst or his/her relative do not have any financial interest in the subject company.
  3. Neither Equitymaster, it's Associates, Research Analyst or his/her relative have actual/beneficial ownership of one percent or more securities of the subject company at the end of the month immediately preceding the date of publication of the research report.
  4. Neither Equitymaster, it's Associates, Research Analyst or his/her relative have any other material conflict of interest at the time of publication of the research report.
DISCLOSURE WITH REGARDS TO RECEIPT OF COMPENSATION:
  1. Neither Equitymaster nor it's Associates have received any compensation from the subject company in the past twelve months.
  2. Neither Equitymaster nor it's Associates have managed or co-managed public offering of securities for the subject company in the past twelve months.
  3. Neither Equitymaster nor it's Associates have received any compensation for investment banking or merchant banking or brokerage services from the subject company in the past twelve months.
  4. Neither Equitymaster nor it's Associates have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the subject company in the past twelve months.
  5. Neither Equitymaster nor it's Associates have received any compensation or other benefits from the subject company or third party in connection with the research report.
GENERAL DISCLOSURES:
  1. The Research Analyst has not served as an officer, director or employee of the subject company.
  2. Equitymaster or the Research Analyst has not been engaged in market making activity for the subject company.
Definitions of Terms Used:
  1. Buy recommendation: This means that the investor could consider buying the concerned stock at current market price keeping in mind the tenure and objective of the recommendation service.
  2. Hold recommendation: This means that the investor could consider holding on to the shares of the company until further update and not buy more of the stock at current market price.
  3. Buy at lower price: This means that the investor should wait for some correction in the market price so that the stock can be bought at more attractive valuations keeping in mind the tenure and the objective of the service.
  4. Sell recommendation: This means that the investor could consider selling the stock at current market price keeping in mind the objective of the recommendation service.
Feedback:
If you have any feedback or query or wish to report a matter, please do not hesitate to write to us.

Small Investments
BIG Returns

Zero To Millions Guide 2018
Get our special report, Zero To Millions
(2018 Edition) Now!
We will never sell or rent your email id.
Please read our Terms

SAIL SHARE PRICE


Dec 15, 2017 01:35 PM

TRACK SAIL

COMPARE SAIL WITH

MARKET STATS