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Arihant Capital
SAIL (Reduce)
CMP: ₹62.85
Target: ₹51
Steel Authority of India Ltd’s Q4FY15 result was below expectation with company reporting profit after tax of ₹334 crore, a decrease of 20.3 per cent on y-o-y basis. Sales volume was 32 lakh tonnes (though up 11.9 per cent q-o-q, down 8.6 per cent on y-o-y). Blended realisations (calculated) were down 6.6 q-o-q at ₹35,842 a tonne, while on y-o-y basis it was down by 5.8 per cent. Consequently revenues declined 14.2 per cent y-o-y. Operating profit margin for the quarter came under pressure on back of steep fall in realisations.
Highlights: a) Post FY15 SAIL has reduced prices of steel by ₹700/tonne in April and ₹1000/tonne in May. This will further put pressure on operating margins. b) Company spent ₹6,840 crore on capex in FY15. c) Huge capex at this point in time, when not sufficient cash is generated from business, will only increase debt burden of the company.
Employee expenses increased marginally to ₹8,166/t from ₹8,043/t on q-o-q basis. Going forward we forecast imports from China/ CIS to increase. Timely completion of its expansion, upgrading and modernisation programme remains the key.
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