X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 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: Strong turnaround continues - Views on News from Equitymaster
 
 
  • PRINT
  • E-MAIL
  • FEEDBACK
  • A  A  A
  • Oct 30, 2003

    SAIL: Strong turnaround continues

    Steel Authority of India Limited (SAIL), the public sector steel behemoth, had yet another encouraging quarter as the company continues on a strong path towards turning around on a full year basis. SAIL has declared its September quarter (2QFY04) results wherein it has reported a 43% YoY growth in its topline. Further, for the quarter, the company has posted a profit of Rs 5 bn as compared to a loss of Rs 1.6 bn in the corresponding period last year. What is commendable here is the fact that the company has managed to improve its operating margins substantially by a substantial 930 basis points during the September quarter as compared to the same period last year, which led to a 167% YoY growth in operating profits for the company. Further, the story for the first half of the current fiscal is not much different.

    (Rs m) 2QFY03 2QFY04 % Change 1HFY03 1HFY04 % Change
    Net Sales 35,629 50,882 42.8% 73,748 93,631 27.0%
    Other Income 669 280 -58.1% 722 318 -56.0%
    Expenditure 31,836 40,754 28.0% 66,542 75,546 13.5%
    Operating Profit (EBDIT) 3,793 10,128 167.0% 7,206 18,085 151.0%
    Operating Profit Margin (%) 10.6% 19.9%   9.8% 19.3%  
    Interest 3,349 2,400 -28.3% 7,030 5,032 -28.4%
    Depreciation 2,813 2,777 -1.3% 5,686 5,594 -1.6%
    Profit before Tax (1,699) 5,231   (4,788) 7,778  
    Extraordinary items - -   - -  
    Tax (116) 180   (116) 180  
    Profit after Tax/(Loss) (1,584) 5,052   (4,672) 7,598  
    Net profit margin (%) -4.4% 9.9%   -6.3% 8.1%  
    No. of Shares 4,130 4,130   4,130 4,130  
    Diluted Earnings per share*   4.9     3.7  
    P/E Ratio         12.2  
    (* annualised)            

    While the company has not provided the volume sales figures, strong growth in topline is a factor of both – higher volume sales and improvement in realisations owing to significant higher steel prices. However, reportedly, SAIL has managed to improve its volume sales by about 10%. Also, it must be noted that steel prices have improved by an average 10% in 2QFY04 as compared to the corresponding quarter last year and this has benefited the company immensely, helping it to continue to turnaround. Further, exports have played an important role in propelling the topline of SAIL, which seems to have increased by over 100% YoY. The company, similar to other steel companies in the industry, has continued to target China for its exports.

    Cost break-up
    (% of net sales) 2QFY03 2QFY04
    Raw materials 39% 31%
    Staff costs 24% 20%
    Stores 10% 8%
    Power & Fuel 15% 11%
    Other expenditure 13% 10%

    SAIL continues to improve its operating efficiencies substantially, which is evident from the table of cost break-up above. On all of the cost aspects, the company has managed to improve its performance. These efforts have helped its operating margins to improve from 11% in 2QFY03 to 20% in 2QFY04. Further, the company continues to benefit from the low interest rate scenario as its interest outgo has declined by 28% YoY. After paring debts considerably in FY03, SAIL has continued to bring the debt down further and also restructure some other, so as to bring down its debt servicing liability. This effort is likely to continue for some more quarters considering the huge debts on the balance sheet of the company.

    At Rs 45, the stock is trading at a P/E multiple of 12.2x its annualised 1HFY04 earnings. This valuation is significantly on the higher side of the spectrum considering the fact that the growth of the sector and the companies per se are largely linked to the economic growth. Moreover, we feel that, being a public sector company, it is very difficult for SAIL to match the operating efficiencies of private players like Tisco and, as such, it commanding a premium valuation to Tisco (9.6x) is in itself a cause for concern. Moreover, the concerns over the steel prices weakening in FY05 could mar SAIL’s plans of sustaining its growth story.

     

     

    Equitymaster requests your view! Post a comment on "SAIL: Strong turnaround continues". Click here!

      
     

    More Views on News

    SAIL: Loss at EBITDA Level Due to Higher Raw Material Cost (Quarterly Results Update - Detailed)

    Jun 12, 2017

    The company registered a negative EBITDA of Rs 2.64 billion during the quarter. This is on the back of an increase in raw material prices.

    SAIL: Pressure Continues. Loss at Operating Levels... (Quarterly Results Update - Detailed)

    Feb 15, 2017

    SAIL has reported a 26.2% YoY increase in the topline while the bottomline reported a loss of Rs 7.94 billion.

    SAIL: Good Performance at EBITDA Level, Headwinds in the Offing (Quarterly Results Update - Detailed)

    Dec 21, 2016

    SAIL has reported a 21.4% YoY increase in the topline while the bottomline reported a loss of Rs 7.31 billion.

    Tata Steel: A Strong Quarter (Quarterly Results Update - Detailed)

    Aug 12, 2017

    Tata Steel reported a robust operating performance on the back of strong domestic and European operations.

    Tata Steel: Strong Quarterly Performance (Quarterly Results Update - Detailed)

    May 22, 2017

    Tata Steel reported a robust operating performance on the back of strong domestic and European operations.

    More Views on News

    Most Popular

    Demonetisation Barely Made Any Difference to Tax Collections(Vivek Kaul's Diary)

    Aug 7, 2017

    The data tells us quite a different story from the one the government is trying to project.

    Proxy Plays: A Smart Way to Bet on 'Off Limits' Companies(The 5 Minute Wrapup)

    Aug 4, 2017

    The small-cap space is full of small players that are clear proxies to great growth stories and Indian megatrends.

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    7 Financial Gifts For Your Sister This Raksha Bandhan(Outside View)

    Aug 7, 2017

    Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...

    More
    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407
     

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms

    SAIL SHARE PRICE


    Aug 17, 2017 (Close)

    TRACK SAIL

    SAIL 5-YR ANALYSIS

    Detailed Financial Information With Charts

    COMPARE SAIL WITH

    MARKET STATS