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Sesa Goa 3QFY2013 performance highlights and results update

Contributed by Angel Broking

Sesa Goa (Sesa) reported disappointing results for 3QFY2013 due to ban on iron ore mining in Karnataka and Goa. We recommend an Accumulate rating on the stock.

Ban on iron ore mine in Goa dents performance: Net sales declined by 91.0% yoy to Rs.237cr as there was no iron ore production on the back of mining ban in Goa and Karnataka. As a result, the company reported an EBITDA loss of Rs.105cr as compared to a positive EBITDA of Rs.1,085cr in 3QFY2012. It reported a PAT loss of Rs.172cr, compared to a positive PAT of Rs.570cr in 3QFY2012. The share of income from its associate (Cairn India) was Rs.669cr during 3QFY2013. Hence, the fall in the adjusted PAT (Rs.522cr) was cut down to 39.9% yoy.

Western Cluster to start iron ore production by 4QFY2014: Sesa aims to commence first shipment of iron ore from Western Cluster (WCL) beginning 4QFY2014 with an annual run-rate of 4mtpa.

Outlook and valuation: We expect sales volumes to decline drastically from Goa due to the recent ban by the Supreme Court and Ministry of Environment and Forest Clearances (MOEF). Thus, we expect the company’s core business profits to decline significantly in FY2013-14. Considering the ongoing process of group restructuring by the promoter, Vedanta Resources, valuation of Sterlite will mirror the valuation of the consolidated company, Sesa Sterlite. We recommend an Accumulate rating on the stock.