Electrosteel Castings - 4QFY2013 Result Update - Angel Broking

For 4QFY2013, Electroste el Castings (ECL) reported a strong growth in operating profit mainly due to decline in costs as a percentage of sales. We maintain our Buy recommendation on the stock.

Lower costs lead to higher profits: ECL's 4QFY2013 net sales declined by 1.5% yoy to Rs. 495cr due to lower realizations in our view. ECL reported an EBITDA of Rs. 40cr in 4QFY2013, compared to an EBITDA of Rs. 5cr in 4QFY2012, due to lower raw material costs, Power costs and other expenditure and therefore EBITDA margins also increased by 715bp. The company's other income rose by 135.8% yoy to Rs. 57cr and depreciation costs declined by 7.5% yoy to Rs. 13cr. Therefore, the company posted a PAT of Rs. 44cr compared to a PAT of Rs. 6cr in 4QFY2012.

Update on mines: Iron ore mine continues to await stage 2 clearance. The company has ramped up coal production from its coking coal mine to a monthly run-rate of 35,000 tonnes. The company aims to produce 0.6-0.7mn tonnes of coking coal in FY2014.

Outlook and valuation: We maintain our positive stance on the company's initiatives of venturing into steel making through its associate ESL. Further, the company's backward integration initiatives through the allocation of iron ore (although not factored in our estimates currently) and coking coal mines are expected to result in cost savings from FY2014-15. We maintain our Buy view on the stock with a SOTP target price of Rs. 24.

Source : Equity Bulls

Keywords