24 April 2012
4QFY12 Results Update | Sector: Metals
Tata Sponge Iron
Equity Shares (m)
52-Week Range (INR)
1,6,12 Rel. Perf. (%)
M.Cap. (INR b)
M.Cap. (USD b)
Tata Sponge's 4QFY12 adjusted PAT grew 9% QoQ (but down 41% YoY) to INR182m, higher than our estimate
of INR164m on the back of higher volumes of 73kt (v/s estimate 55kt). Reported PAT was impacted by the
payment of INR54m as finance charges on account of excise duty dispute. There seems to be some recovery
on mining constraints leading to higher volume for the quarter.
Net sales grew 41% QoQ (down 6% YoY) to INR1.84b on higher volume growth over the low base of 3QFY12.
Average calculated realization for sponge iron increased 13% QoQ to INR24,774/ton.
EBITDA grew 4% QoQ (down 45% YoY) to INR255m. EBITDA margin contracted 490bp QoQ to 13.9%. Calculated
EBITDA/ton declined 22% QoQ to INR3,489 on account of higher raw material prices, mainly coal.
Despite lower production and sales volumes, robust sponge realizations helped boost both revenue and
margins. Domestic sponge iron prices are currently close to their 3-year high levels (~INR24,000/ton v/s
INR22,293/ton in FY12) as many producers are suffering raw material shortages, especially iron ore post
Karnataka mining ban and increased regulatory oversight in Odisha.
Current cash and cash equivalents stand at INR2.2b with a dividend yield of 2.5%. Stock trades at attractive
valuations of FY13 EV/EBITDA of 1.4x, P/E of 4.8x and P/BV of 0.8x. Maintain
(Pavas.Pethia@MotilalOswal.com); +9122 39825413