Bhushan Steel Limited - Higher fixed costs dent bottomline - Emkay

Reco: HOLD
CMP: Rs 470
Target Price: Rs 408

* PAT at Rs 2.06 bn, down 2% YoY and 38% QoQ, primarily due to higher interest rate costs (up 75%/ 26% YoY/QoQ ) of Rs 3.8 bn and depreciation (up 37%/ 25% YoY/ QoQ) of Rs 2.1 bn.

* EBITDA at Rs 8.6 bn was up 30% YoY but down 4% QoQ. EBITDA margin (30%) despite falling 129 bps QoQ, was up 73 bps YoY. EBITDA/ tonne stood at Rs 14,342 almost flat QoQ.

* Topline at Rs 28.4 bn, up 27% YoY and flat QoQ beat our estimates of Rs 26.1 bn, on account of higher volumes at 6.01 lakh tonnes and better realizations of Rs 47,259/ tonne.

* Believe, current valuations are expensive; fixed costs would continue to be an overhang; We value the stock at 5.5xFY14 EV/EBITDA with target price of 408/ share; Hold.

Source : Equity Bulls

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