Neutral on Sarda Energy & Minerals - Motilal Oswal

Sarda Energy & Minerals (SEML IN; Mkt Cap USD0.2b, CMP Rs231, Neutral)

Sarda Energy and Mineral's standalone adjusted PAT for 3QFY11 was Rs55m (down 67% YoY) v/s a loss of Rs4m in 2QFY11.

Net sales increased 7% QoQ to Rs2.1b. Steel division revenue grew 10% QoQ to Rs1.1b due to higher steel volumes.

Ferro alloy division revenue grew 2% QoQ. Ferro alloy sales tonnage increased 8% QoQ to 16,441tons while realization declined 6% QoQ to Rs59,783/ton.

EBITDA increased 27% QoQ to Rs205m, well below our estimate of Rs378m due to poor performance from ferro alloy division.

The 0.6mtpa pellet plant has failed to operate satisfactorily even after two years of operations and numerous modifications.

We have cut our FY11E EPS by 38% to Rs11.6 to factor the lower than expected results for 3QFY11. We have also incorporated lower pellet production and higher raw material costs in our FY12 estimates. We have cut FY12E EPS by 30% to Rs25.3 from Rs36.5 earlier. The stock is trading at 9.1x FY12E EPS and an EV of 9.1x FY12E EBITDA.

Source : Equity Bulls

Keywords