KIM ENG raises Sesa Goa target to Rs 540/sh

MUMBAI: KIM ENG Securities India has upgraded Sesa Goa to ‘Buy’ with a price target of Rs 540 per share after the company announced its March quarter results.

Sesa Goa’s earnings beat market consensus by 15% due to strong iron ore prices. It reported revenue of Rs 24 billion, up 68% Y-o-Y, EBITDA of Rs16 billion, up 100% Y-o-Y, sales volume of 7.3 million tonnes, up 45% Y-o-Y. Selling price moved to Rs 3.1k/ton, up 22% Y-o-Y.

“Rise in sales volume was due to Dempo mine acquisition in FY10 which increased mining capacity by 15%. In FY11, we expect volume to rise 22% to 25m tons. We upgrade our FY11F EPS by 17% to Rs61 supported by higher iron ore prices (up 50% Y-T-D to Rs5.5k/ton). At CMP, Sesa Goa trades at an EV/EBITDA of 5x FY11F (25% lower than global peers). Our new target price of Rs 540 (earlier Rs 480) is based on EV/EBITDA of 6x FY11F,” the post-result note said.