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Sesa Sterlite 3QFY2014 performance highlights and results update

January 30, 2014, Thursday, 06:21 GMT | 02:21 EST | 11:51 IST | 14:21 SGT
Contributed by Angel Broking

Sesa Sterlite’s 3QFY2014 net profit was slightly ahead of street expectations. We recommend a Neutral rating on the stock.
Top-line stood at Rs.19,523cr: The company’s actual 3QFY2014 results are not comparable with 3QFY2013 results as the two companies, Sesa Goa and Sterlite Industries were merged during August 2013. The company’s 3QFY2014 net sales stood at Rs.19,523cr. Its EBITDA stood at Rs.6,490cr. The company reported a forex loss of Rs.82cr during the quarter. Adjusting for the forex loss, its adjusted net profit stood at Rs.1,950cr, while its reported net profit stood at Rs.1,868cr.
Aluminium business update: The company has delayed the commissioning of the 325ktpa BALCO-III Aluminium smelter from 3QFY2014 to 1HFY2015. The company stated that it continues to evaluate the potential start-up date of the 1.25mn tonne smelter at Jharsuguda.
Karnataka resumes mining operations: The company has resumed iron ore mining operations in Karnataka from December 28, 2013 where it has 2.29mn tonne per annum capacity and is gradually ramping up the production at the rate of 0.5mn tonne per month. Also, it stated that the sale of iron ore inventory in Goa through e-auction is likely to happen in FY2015.
Outlook and valuation: We expect Sesa Sterlite to benefit from the expansion of Zinc-Lead smelting capacity during FY2014-15. However, its Aluminium segment’s profitability is to remain under pressure while concerns over the mining ban in Goa remain. We value Sterlite at Rs.204, based on the SOTP methodology and recommend a Neutral rating on the stock.