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SAIL: Raw material cost plays spoilsport - Views on News from Equitymaster

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SAIL: Raw material cost plays spoilsport
Oct 28, 2010

SAIL has announced 2QFY11 results. The company has reported 6.6% YoY growth in sales. However, bottom-line registered a sharp decline of 34.5% YoY during the quarter. Here is our analysis of the results.

Performance summary
  • Topline grows 6.6% YoY in 2QFY11 on the back of strong output from Bhilai, Durgapur and Rourkela steel plants. Other operating income increased 122% during the quarter.
  • Operating margins fall to 16.0% this quarter as compared to 24.0% in 2QFY10, mainly due to raw material price escalation. Raw material cost as a percentage of revenues increased from 50.3% in 2QFY10 to 54.5% in 2QFY11.
  • Net profits decline 34.5% YoY in 2QFY11 on the back of lower other income, higher depreciation and an increase in interest expenses.


Financial performance snapshot
(Rs m) †2QFY10† †2QFY11† Change †1HFY10† †1HFY11† †Change†
Sales ††††††† 99,439 †† 106,029 6.6% †††† 188,990 ††† 196,323 3.9%
Other operating income† †††††††††††† 914 ††††††† 2,033 122.3% ††††††††† 2,997 †††††††† 3,072 2.5%
Expenditure ††††††† 76,470 ††††† 91,114 19.1% †††† 149,290 ††† 164,019 9.9%
Operating profit (EBDITA) ††††††† 23,884 ††††† 16,948 -29.0% ††††††† 42,697 †††††† 35,376 -17.1%
Operating profit margin (%) 24.0% 16.0%   22.6% 18.0%  
Other income ††††††††† 5,362 ††††††† 3,754 -30.0% ††††††† 10,763 †††††††† 7,616 -29.2%
Interest †††††††††††† 735 ††††††† 1,090 48.4% ††††††††† 1,572 †††††††† 2,387 51.8%
Depreciation ††††††††† 3,322 ††††††† 3,688 11.0% ††††††††† 6,598 †††††††† 7,193 9.0%
Profit before tax 25,189 15,923 -36.8% ††††††† 45,291 †††††† 33,412 -26.2%
Tax 8,554 5,023 -41.3% ††††††† 15,352 †††††† 10,746 -30.0%
Profit after tax/(loss) 16,635 10,900 -34.5% 29,939 22,667 -24.3%
Net profit margin (%) 16.7% 10.3%   15.8% 11.5%  
No. of shares (m)         4,132  
Basic & diluted earnings per
share (Rs) (Not Annualised)
        ††††††††††††† 5.5  
P/E ratio (x) *         †††††††††† 13.9  

What to expect?
At the current price of Rs 203, the stock is trading at 11.6 times our estimated FY13 earnings. We will update our analysis post a conference call scheduled with the management tomorrow morning.

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Jul 20, 2018 12:13 PM

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