PINC maintains 'hold' on Bhushan Steel
PINC has downgraded its stock recommendation on Bhushan Steel Ltd to 'hold' and plans to revisit the same once the slab caster and HSM is commissioned in Dec '08 and Apr '09 respectively.
By ET Online |
MUMBAI: PINC has downgraded its stock recommendation on Bhushan Steel Ltd to 'hold' and plans to revisit the same once the slab caster and HSM is commissioned in Dec '08 and Apr '09 respectively.
At the CMP of Rs 687, the stock trades at P/E of 4.6 time and EV/EBIDT of 3.7 times discounting its FY10E EPS of Rs 150.
Bhushan Steel is well placed to reap the benefits of the ongoing integration for HR coil, post completion of its capex. However, with high debt taken on books for the ongoing expansion and steel prices cooling off due to sluggish demand, pressure would be witnessed on net profits in the form of higher capital charges.
The company reported sales of Rs 1520 crore, a YoY rise of 42 per cent on back of higher realisations across its entire product spectrum. This also led to a 354 basis points jump in OPM to 22 per cent, resulting in operating profit growth of 69 per cent to Rs 330 crore. Net profits rose by 38 per cent to Rs 140 crore.
A mixed trend was witnessed in production with flat products volume declining 18 per cent to 304.8 k million tonne and long products recording a rise of 21 per cent to 186k mt (driven by contribution from Orissa facility). This resulted in an overall decline of 6.6 per cent in production volumes (490.8k mt) and a 7 per cent decline in sales volume to 292.8k mt (post captive consumption).
The Orissa facility is integrated to produce sponge iron and billets for further value added products. This resulted in a 354 bps expansion in OPM to 22%. Consequently, operating profit surged 69% to Rs 330 crore.
At the CMP of Rs 687, the stock trades at P/E of 4.6 time and EV/EBIDT of 3.7 times discounting its FY10E EPS of Rs 150.
Bhushan Steel is well placed to reap the benefits of the ongoing integration for HR coil, post completion of its capex. However, with high debt taken on books for the ongoing expansion and steel prices cooling off due to sluggish demand, pressure would be witnessed on net profits in the form of higher capital charges.
The company reported sales of Rs 1520 crore, a YoY rise of 42 per cent on back of higher realisations across its entire product spectrum. This also led to a 354 basis points jump in OPM to 22 per cent, resulting in operating profit growth of 69 per cent to Rs 330 crore. Net profits rose by 38 per cent to Rs 140 crore.
A mixed trend was witnessed in production with flat products volume declining 18 per cent to 304.8 k million tonne and long products recording a rise of 21 per cent to 186k mt (driven by contribution from Orissa facility). This resulted in an overall decline of 6.6 per cent in production volumes (490.8k mt) and a 7 per cent decline in sales volume to 292.8k mt (post captive consumption).
The Orissa facility is integrated to produce sponge iron and billets for further value added products. This resulted in a 354 bps expansion in OPM to 22%. Consequently, operating profit surged 69% to Rs 330 crore.
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