Sesa Goa - 4QFY2013 Result Update - Angel Broking

Sesa Goa (Sesa) reported disappointing results for 4QFY2013 due to ban on iron ore mining in Karnataka and Goa. We recommend a Neutral rating on the stock.

Ban on iron ore mine in Goa dents performance: The net sales declined by 89.6% yoy to Rs. 291cr on account of no iron ore sales due to mining ban in Goa. Its Pig iron and Met coke sales however grew 59.0% and 28.0% to 95kt and 90kt respectively. Consequently the company reported an EBITDA loss of Rs. 97cr as compared to a positive EBITDA of Rs. 1,168cr and a PAT loss of Rs. 216cr, compared to a PAT of Rs. 696cr in 4QFY2012. Sesa reported a share of income from associate (Cairn India) of Rs. 513cr during 4QFY2013. Hence the adjusted PAT decreased 73.8% yoy to Rs. 297cr.

Update on Sesa-Sterlite merger: The proposed Sesa-Sterlite merger announced on February 25, 2012 has received the approval of the High Court of Bombay at Goa on April 3, 2013. The hearings at the High Court of Madras have been completed and the order is awaited.

Outlook and valuation: We expect sales volumes to decline drastically from Goa due to the recent ban by the Supreme Court and Ministry of Environment and Forest Clearances (MOEF). Thus, we expect the company's core business profits to decline significantly in FY2014. Considering the ongoing process of group restructuring by the promoter, Vedanta Resources, valuation of Sterlite will mirror the valuation of the consolidated company, Sesa Sterlite. We recommend a Neutral rating on the stock.

Source : Equity Bulls

Keywords