Sterlite Industries Ltd (Q3 FY13)

India Infoline News Service | Mumbai |

Revenue during the quarter declined 3% qoq to Rs107.4bn, lower than our estimate of Rs114.9bn.

CMP Rs113, Target Rs115, Upside 1.8%

  • Topline of Rs107.4bn was lower than our estimate of Rs114.9bn and declined 3% qoq on account of lower power sales
  • BALCO’s aluminium revenue declined 3% qoq to Rs8.3bn due to high alumina and coal prices. BALCO has managed to receive stage II forest clearance for its coal mine and expects to start mining in Q2 FY14
  • VAL’s revenue declined 6% qoq to Rs17.13bn as alumina production declined sharply by 49% qoq
  • Copper business margins impacted by lower sulphuric and phosphoric prices
  • HZL’s revenue increased 10.9% qoq as production of mined metal production jumped 11% yoy
  • Revenue from power business declined 41% qoq due to evacuation restrictions imposed by the grid authorities
  • Trading near fair value; Downgrade to Market Performer with a 9-month price target of Rs115

Result table

(Rs m) Q3 FY13  Q2 FY13 % qoq Q3 FY12 % yoy
Net sales 107,375 111,026 (3.3) 103,037 4.2
Mining & manufacturing (50,226) (51,054) (1.6) (49,147) 2.2
Personnel costs (4,747) (4,513) 5.2 (4,150) 14.4
Other overheads (29,133) (30,189) (3.5) (26,557) 9.7
Operating profit 23,269 25,270 (7.9) 23,183 0.4
OPM (%) 21.7 22.8 - 22.5 -
Depreciation (5,382) (5,221) 3.1 (4,575) 17.6
Interest (2,269) (1,777) 27.6 (3,234) (29.8)
Other income 8,590 8,476 1.3 6,174 39.1
PBT 24,208 26,748 (9.5) 21,549 12.3
Tax (3,555) (5,109) (30.4) (5,053) (29.6)
Effective tax rate (%) 14.7 19.1   23.4  
Adjusted PAT 12,539 15,239 (17.7) 9,199 36.3
Adj. PAT margin (%) 11.7 13.7 - 8.9 -
Extra ordinary items (625) 2,188 (129) (64) 872
Reported PAT 11,914 17,427 (31.6) 9,135 30.4
Ann. EPS (Rs) 14.2 20.7 (31.6) 10.9 30.4
Source: Company, India Infoline Research

Lower power sales led to a 3% qoq decline in topline
Revenue during the quarter declined 3% qoq to Rs107.4bn, lower than our estimate of Rs114.9bn. The under-performance was largely due to lower power sales volume under Sterlite Energy Ltd (SEL) and BALCO. Power production at both the subsidiaries declined due to evacuation restrictions imposed by the grid authorities after the Northern and Eastern region grid failure in August 2012. The impact of low power revenue was marginally offset by strong performance by India zinc business revenue. Copper business revenue declined 4.7% qoq as it was affected on account by lower by-product prices.

BALCO: BALCO’s aluminium revenue declined 3% qoq to Rs8.3bn which was in-line with our estimates. Aluminium production remained flat on a yoy basis but declined 2% qoq at 62,000 tons. Aluminium CoP remained flat on a qoq in Rupee terms as the impact of lower coal costs was offset by higher alumina prices. On a yoy basis, CoP jumped by 10% on account of higher alumina cost and higher coal prices as supply of linkage coal reduced. Aluminium premium too declined on a qoq basis. BALCO has managed to receive stage II forest clearance for its coal mine. With this the company has managed to receive all approvals for mining. The company expects to sign the mining lease agreement with the Orissa Government and would commence the process of land acquisition post that. The management expects mining to start in Q2 FY14, which we feel is a tough task. BALCO targets an initial production of 1mtpa in FY13, which is expected to increase to 3mtpa by FY15. The coal block is allotted for the existing 810MW power plant. The commissioning of the 1,200MW power plant has been delayed due to suspension of approvals to operate. The company is now waiting for regulatory approvals to start the power plant. In the meanwhile, the management plans to tap the first metal at the 0.325mtpa smelter in Q1 FY14 and would consume power from the existing 810MW power plant.

BALCO’s quarterly performance
(Rs m) Q3 FY13  Q2 FY13 % qoq Q3 FY12 % yoy
Aluminium production (Tons) 62,000 63,000 (1.6) 63,000 (1.6)
Revenue (Rs mn) 8,320 8,590 (3.1) 8,010 3.9
EBIDTA (Rs mn) 640 950 (32.6) 320 100.0
PAT (Rs mn) (80) 320 - (170) -
Avg LME Aluminium prices (US$/ton) 2,019 1,951 3.5 2,113 (4.4)
Net CoP - Cathode (c/lb) 1,995 1,970 1.3 1,880 6.1
Source: Company, India Infoline Research

Vedanta Alumina (VAL): Revenue declined 6% qoq to Rs17.13bn on account of a decline in alumina production. VAL produced 104,000 tons of alumina registering a decline of 49% qoq. The company had taken a temporary shutdown of its refinery due to unavailability of bauxite. The company is trying to source bauxite from Orissa and other states to restart its operations. Despite a fall in alumina production, the company managed to produce its highest ever aluminium metal during the quarter. It managed to produce 135,000 tons of metal, higher than its rated capacity. Aluminium CoP in rupee terms declined marginally on a qoq basis due to higher availability of linkage coal. The impact of operational efficiency and lower coal costs was offset by increase in alumina purchase cost. In dollar terms it increased to US$1,928/ton in Q3 FY13 from US$1,905/ton in Q2 FY13.

VAL’s quarterly performance
(Rs m) Q3 FY13  Q2 FY13 % qoq Q3 FY12 % yoy
Aluminium production (Tons) 135,000 134,000 0.7 107,000 26.2
Alumina production (Tons) 104,000 205,000 (49.3) 236,000 (55.9)
Revenue (Rs mn) 17,130 18,190 (5.8) 14,440 18.6
 

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