Maintain 'buy' on SAIL – TP Rs.109 - Geojit BNP Paribas

- Buy rating on SAIL is maintained with a target price of Rs.109 over one year.

- Company's margin is expected to improve from 1QFY13 as against the margin miss in 4QFY12. This is because of declining coal/ coke costs and resilient steel prices.

- Pick up in expansion capex gives higher confidence on FY14 volumes.

- Buy rating is maintained on inexpensive valuation and potential earnings rebound in FY13-14 led by better coke availability and volume growth.

- 4QFY12 earnings miss was driven by consumption of higher priced raw material inventory. This effect is expected to subside by 1HFY13.

- Average sales price (ASP) is higher than expected and should increase further with resilient steel prices.

- Margins should improve going forward because of strong average sales price and softening coal/coke costs. Positive effects of these would offset the increase in staff cost resulted from wage revision.

- FY13 expected EPS has been cut by 2% due to delay in coke availability improvement and the target price is set at Rs.109.

- Commissioning of IISCO, Rourkela and Bokaro projects by end-FY13 may lead to a re-rating of the stock over the next 2-3 quarters.

Source : Equity Bulls

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