Religare assigns 'buy' to Sarda Energy & Minerals; target Rs 404

MUMBAI: Religare Research has reiterated ���buy��� on Sarda Energy & Minerals for a target price of Rs 404. The Apr-Jun 2008-09 results reported by Sarda Energy were ahead of the brokerage expectations, with net profit growth of 128 per cent year on year and 19 per cent quarter on quarter to Rs 256.6 crore mainly due to sharp growth of its ferro alloy business.

During the quarter, the company reported ferro alloy volume growth of 21 per cent to 14,902 tonne and realization growth of 231 per cent to Rs 1,05,855 per tonne. The operating margins for the quarter jumped 1,140 basis points sequentially to 38.1 per cent from 26.7 per cent in Jan-Mar 2007-08, mainly due to sharp growth in ferro alloy prices.

The company has commissioned new sponge iron plant of 1,50,000 tonne taking the total sponge iron capacity to 3,60,000 tonne and is increasing its steel melting capacity by 70 per cent to 2,40,000 tonne.

The stock is currently trading at P/E of 6.7x and 4.6x and EV/EBITDAs of 4.6x and 3x based on FY09 and FY10 earnings respectively.