The Hindu Business Line : Sesa Goa firm on hopes of favourable price revision

SESA Goa moved up 5.07 per cent to finish at Rs 966.40 with huge traded volumes on smart buying over hopes of a favourable price revision for the European market in January.

According to market sources, the price revision could be above 40 per cent over the previous year.

The European market contributes around 20 per cent of the company's export sales of iron ore and pig iron, while the Chinese market accounts for roughly 50 per cent of the company's total sales. Pakistan and Japan account for about 12 per cent of yearly sales. Earlier this year, the company penned price revision deals with Chinese buyers and a Pakistani importer.

According to Mr P.K. Mukherjee, Director (Finance) of the company, the overall price increase for iron ore supplies for 2005-06 could be between 40 and 45 per cent. He, however, indicated that the price of coke, one of the company's products meant for the domestic market, is softer this fiscal compared to the previous financial year. Coke is witnessing a cost escalation on one hand and a price deceleration on the other, sources said.

For the Chinese market, the price revision was much better than the previous year, but not high as the Japan Steel Mill mark-up of 71.5 per cent. In case of the European market, which imports on a c.i.f. (cost, insurance & freight) basis, lower global dry bulk freight rates compared to last year may give additional benefits for the company apart from the upward price revision.

The prospecting rights for iron ore, acquired in Jharkhand recently, are also considered by the market players as long-term positives. Market expectation was that the company would reach the point of seeking mining rights by the end of December 2006 along with a proposal for setting up a pig iron plant.

According to Mr Mukesh Modi, of Anagram Stockbroking, the industry consensus is that the company's EPS could be Rs 172 a share for the current fiscal.

At today's closing price, the stock traded at 5.6 times its estimated earnings for 2005-06.

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