Tata Sponge Iron Ltd - Q2FY18 Result Update - Kotak

Tata Sponge's net sales during the quarter grew 20.5% YoY to Rs1,672 mn (down 4.5% QoQ), the sequential decline in revenue was on account of lower volume due to a maintenance shutdown in 2QFY18. EBITDA during the quarter declined ~11% QoQ to Rs344 mn, with an EBITDA margin of 20.6% (est of 19%). The company reported PAT of Rs276mn, lower than our estimates. Considering TTSP's strong balance sheet and improved outlook for the steel sector, foray into steel making through brownfield route, is a key positive. We revised our earnings higher on account of better spreads. Our revised earning stands at Rs77.4 (earlier Rs69.9) and Rs80 (earlier Rs72) for FY18E and FY19E, respectively. At CMP, the stock trades at 4x FY19E EBITDA. We recommend ACCUMULATE (earlier REDUCE) with a revised target price of Rs1,020 (earlier Rs857). We have not assigned any value to the investment of Rs1.8bn made by the company on the coal block, as the company's coal block is yet to put in the auction.

Shares of TATA SPONGE IRON LTD. was last trading in BSE at Rs.910.1 as compared to the previous close of Rs. 924.4. The total number of shares traded during the day was 33200 in over 1249 trades.

The stock hit an intraday high of Rs. 933.9 and intraday low of 902.8. The net turnover during the day was Rs. 30416529.

Source : Equity Bulls

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