Download - Template Stock RecommendationSesa
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CIL
12.15 (ttm)
Market
Pessimistic
about growth Neutral Undervalued
8.93 18.14 181.43 262.79
Hindalco
NalcoHindustan Zinc
.
.
.
Sesa Goa 4.5
company
One year
forward
P0/E1
Accounting
P0/E0
Valuation by
DDM(Multistage growth
model), Stock price(INR)
Comparison with
Industry (P/E) -
Mkt expectations
for Company
growth
Free cash flow
Valuation(DCF),
Stock price(INR)
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Valuation by
Multiples
P0/E1 and
EV/EBITDA
by P0/E1 : Resistance ~ 230 INR
Angel Broking:
Neutral
by EV/EBITDA : Support ~ 180 INR
Avendus: Buy
target price = 235
INR172.6
Proposed merger of
Sterlite Industries
(India) Limited with
Sesa Goa Limited,
pending for
regulatory and other
statutory approvals
CMP in INR
on 29-08-
2012
Technical analysis
(resistance/ support
levels) for 1 year
Top
brokerage/Equity
research agencies
recommendation
Any recent significant
news impacting
Business prospectus
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undervalued
Neutral/Undervalued
Overall Stock
recommendation
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Multi stage growth mo
FY13 FY14
g 17.50% 17.50%
Ke 17.36%
DPS(FY18)=DPS(FY12)x(1+17.5%)^5x(1+10.94%) 10.2578
P(FY17) = DPS(FY18)/(ke -g') 359.1874P(FY12) = DPS(FY12)x(1+g)x[{(1+g)/(1+ke)}^5-1]/(g-ke)+P(FY17)/(1+ke)^5 181.4345
P0/E1 = (1-b)/(k-ROExb)
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del
FY15 FY16 FY17
17.50% 17.50% 17.50% after FY17 constant growth model with g' 14.50%
Assuming no change in Beta (Risk of investor with Sesa Goa)
At g' = 14.5%, P(FY12) = 181.5, approx. equal to current market price
so we will be neutral on Sesa Goa as per DDM model
As g' = 14.5% is not so conservaative growth estimate
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in Rs. Cr. Mar '12 Mar '11 Mar '10
Net Cash From Operating Activities 1538.58 2953.65 2003.48
Fixed assets Investment 481.41 837.29 131.59
Proceed from sales of Fixed assets 1.97 4.3 0.36
Net new Investment on Capacity 479.44 832.99 131.23
free cash flow (after tax CFO - new Investments) 1059.14 2120.66 1872.25
YoY Growth rate in Free cash Flows % -50.06% 13.27% -3.56%
Note: FY12 can be treated as outlier in g
Projected Growth rate g forever 8.00%
Projected FCF for FY13 (g applied for 2 yrs on FY11 FCF) 2473.538
Ke 17.36% Approximation: Althou
PV of all future cash flows in FY12= FCF(FY13)/ (Ke - g) in rs. Cr 26438.45 Assuming all equity fin
Value of Debt in FY12 3,599.13Value of Equity in FY12 22,839.32
Shares in issue (lakhs) 8,691.01
Per Share Value(price) in rs 262.79 Even at conservative g
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Mar '09 Mar '08
2077.67 1306.87 Note: From particulars of Cash flow from Investing activiti
136.45
0.16 FY12
136.29 481.41
1941.38 1.97
479.44
rowth rate estimation as macroeconomic environment
gh unleveraged beta should be used here, we are using same leveraged beta as in DDM for Ke estimation
ancing for capacity investments, as Debt(leverage) will add to PV by Tax shield
owth rate of g = 8%, CMP = 172.6 shows stock is undervalued
Purchase of fixed assets
Proceeds from sale of fixed assets
Net new Investment on Capacity
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es(Annual Report)
FY11 FY10 FY09
837.29 131.59 136.45
4.3 0.36 0.16
832.99 131.23 136.29
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Valuation by Multiples
one year Forward P0/E1 4.5
forward EV/EBITDA (FY13) 7.4
Stock Price by P0/E1
Stock price by EV/EBITDA
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DDM
Mar '12 Mar '11 Mar '10
Dividend paid In Rs. Cr 347.64 315.23 270.06
Shares in issue (lakhs) 8,691.01 8,691.01 8,309.62
PAT 1,679.94 3,432.80 2,118.09
PAT growth rate -51.06% 62.07% 9.04%
EPS in Rs. 19.33 39.50 25.49DPS in Rs. 4.00 3.63 3.25
Dividend payout ratio 20.7% 9.2% 12.8%
Retention ratio(b) 79.3% 90.8% 87.2%
ROE 13.0% 29.6% 29.4%
g= ROExb 10.3% 26.9% 25.6%
Dividend growth rate( by DPS) 10.3% 11.6% 44.4%
Stock price in Rs. on 29-08-2012 172.6
Accounting (P0/E0) on 29-08-2012 8.93
TTM, P/E
Industry P/E, on 29-08-2012 18.14
P0/E1 (2013f) (Angel broking) 4.5
P0/E1 (2013f)(Avendus) 4.3
Avg Stock Price P0, in Q1-13(approx.) 185
Projected E1 for 2013 by P0/E1 41.11
FY12 can be treated as outlier in growth rate esti
so if we eliminate FY12 then growth rate estimati
expected g after droping FY12 frm consideration
2 yr CAGR in E1 over FY11 earnings 2.02%
ROE%(FY13) expectations (Angel Broking) 22.30%
expected g for FY13 (Avendus) = (ROE13x b12) 17.7%
ROE%(FY13) expectations (Avendus) 0.22expected g for FY13 = (ROE13x b12) 17.45% These seems most relia
but certainly such a hig
so we will use multi sta
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Mar '09 Mar '08 Avg
177.13 177.13
7,872.40 393.62
1,942.49 1,492.00
30.19%
24.67 379.052.25 45.00
9.1% 11.9% 12.7%
90.9% 88.1% 87.3%
43.0% 53.5% 33.7%
39.1% 47.1% 29.8%
-95.0%
ation as macroeconomic environment, huge forex losses to company like Sesa Goa
on on basis of past trends..as following:
le growth estimates as compared to other averages
growth couldnt last forever (Constant growth model)
e growth model, for 5 years g = 17.5% and after that constant growth let say g' = 15%
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Rm Daily avg avg over 20 yrs CAGR
beta 1.56
Rf (364 days T-bill) 8.12%
Rm 14.04% 20.30% 11.03%
Ke 17.36% 27.12% 12.65%
Time Period: 22 Feb-11 to 23 Feb-12, 250 days (Sat and Sun B
Average Mkt rate(Rm 0.04%
Annual Mkt return(R 14.04%
by compounding dai
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Historical BSE Sensex yoy Returns
Year close return
1991 1908 0.9103
1992 2615 0.370545073
1993 3346 0.279541109
1994 3927 0.173640167
1995 3110 -0.208046855SE off) 1996 3085 -0.008038585
1997 3659 0.186061588
1998 3055 -0.165072424
1999 5006 0.638625205
2000 3972 -0.206552137
2001 3262 -0.178751259
2002 3377 0.035254445
2003 5839 0.729049452
2004 6603 0.130844323
2005 9398 0.423292443
2006 13787 0.467014258
2007 20287 0.47145862
2008 9647 -0.524473801
2009 17465 0.810407381
2010 20509 0.17429144
2011 15455 -0.246428397
Avg. YoY 20.30%
CAGR 11.03%
ly rate over 365 days
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Mkt. return
Date BSE sensex return
Rmt
22-Feb-11 -0.77
23-Feb-11 -0.64
24-Feb-11 -325-Feb-11 0.39
28-Feb-11 0.69
1-Mar-11 3.5
3-Mar-11 0.23
4-Mar-11 -0.02
7-Mar-11 -1.43
8-Mar-11 1.19
9-Mar-11 0.16
10-Mar-11 -0.77
11-Mar-11 -0.84
14-Mar-11 1.46
15-Mar-11 -1.47
16-Mar-11 1.05
17-Mar-11 -1.14
18-Mar-11 -1.49
21-Mar-11 -0.22
22-Mar-11 0.84
23-Mar-11 1.21
24-Mar-11 0.79
25-Mar-11 2.53
28-Mar-11 0.6829-Mar-11 0.94
30-Mar-11 0.89
31-Mar-11 0.8
1-Apr-11 -0.13
4-Apr-11 1.45
5-Apr-11 -0.08
6-Apr-11 -0.38
7-Apr-11 -0.11
8-Apr-11 -0.71
11-Apr-11 -0.97
13-Apr-11 2.25
15-Apr-11 -1.57
18-Apr-11 -1.53
19-Apr-11 0.16
20-Apr-11 1.83
21-Apr-11 0.67
25-Apr-11 -0.09
26-Apr-11 -0.2
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1-Jul-11 -0.44
4-Jul-11 0.28
5-Jul-11 -0.37
6-Jul-11 -0.09
7-Jul-11 1.88
8-Jul-11 -1.15
11-Jul-11 -0.7212-Jul-11 -1.65
13-Jul-11 1
14-Jul-11 0.12
15-Jul-11 -0.3
18-Jul-11 -0.3
19-Jul-11 0.79
20-Jul-11 -0.81
21-Jul-11 -0.36
22-Jul-11 1.55
25-Jul-11 0.8
26-Jul-11 -1.87
27-Jul-11 -0.46
28-Jul-11 -1.21
29-Jul-11 -0.07
1-Aug-11 0.64
2-Aug-11 -1.12
3-Aug-11 -0.94
4-Aug-11 -1.38
5-Aug-11 -2.19
8-Aug-11 -1.82
9-Aug-11 -0.7810-Aug-11 1.62
11-Aug-11 -0.42
12-Aug-11 -1.29
16-Aug-11 -0.65
17-Aug-11 0.66
18-Aug-11 -2.2
19-Aug-11 -1.99
22-Aug-11 1.24
23-Aug-11 0.96
24-Aug-11 -1.29
25-Aug-11 -0.85
26-Aug-11 -1.84
29-Aug-11 3.58
30-Aug-11 1.59
2-Sep-11 0.87
5-Sep-11 -0.64
6-Sep-11 0.89
7-Sep-11 1.2
8-Sep-11 0.59
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9-Sep-11 -1.74
12-Sep-11 -2.17
13-Sep-11 -0.21
14-Sep-11 1.47
15-Sep-11 1
16-Sep-11 0.34
19-Sep-11 -1.1120-Sep-11 2.11
21-Sep-11 -0.2
22-Sep-11 -4.13
23-Sep-11 -1.22
26-Sep-11 -0.69
27-Sep-11 2.95
28-Sep-11 -0.47
29-Sep-11 1.53
30-Sep-11 -1.46
3-Oct-11 -1.84
4-Oct-11 -1.77
5-Oct-11 -0.46
7-Oct-11 2.79
10-Oct-11 2
11-Oct-11 -0.13
12-Oct-11 2.55
13-Oct-11 -0.44
14-Oct-11 1.18
17-Oct-11 -0.34
18-Oct-11 -1.63
19-Oct-11 2.0120-Oct-11 -0.87
21-Oct-11 -0.89
24-Oct-11 0.92
25-Oct-11 1.86
26-Oct-11 0.2
28-Oct-11 2.98
31-Oct-11 -0.56
1-Nov-11 -1.27
2-Nov-11 -0.09
3-Nov-11 0.1
4-Nov-11 0.46
8-Nov-11 0.04
9-Nov-11 -1.18
11-Nov-11 -0.97
14-Nov-11 -0.43
15-Nov-11 -1.38
16-Nov-11 -0.63
17-Nov-11 -1.87
18-Nov-11 -0.55
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21-Nov-11 -2.6
22-Nov-11 0.75
23-Nov-11 -2.27
24-Nov-11 1.01
25-Nov-11 -1.03
28-Nov-11 3.01
29-Nov-11 -0.9830-Nov-11 0.72
1-Dec-11 2.23
2-Dec-11 2.2
5-Dec-11 -0.25
7-Dec-11 0.43
8-Dec-11 -2.3
9-Dec-11 -1.67
12-Dec-11 -2.12
13-Dec-11 0.83
14-Dec-11 -0.76
15-Dec-11 -0.28
16-Dec-11 -2.18
19-Dec-11 -0.72
20-Dec-11 -1.33
21-Dec-11 3.36
22-Dec-11 0.82
23-Dec-11 -0.47
26-Dec-11 1.47
27-Dec-11 -0.61
28-Dec-11 -0.92
29-Dec-11 -1.1730-Dec-11 -0.57
2-Jan-12 0.41
3-Jan-12 2.72
4-Jan-12 -0.36
5-Jan-12 -0.16
6-Jan-12 0.07
7-Jan-12 -0.12
9-Jan-12 -0.22
10-Jan-12 2.22
11-Jan-12 0.07
12-Jan-12 -0.86
13-Jan-12 0.73
16-Jan-12 0.22
17-Jan-12 1.71
18-Jan-12 -0.09
19-Jan-12 1.17
20-Jan-12 0.57
23-Jan-12 0.08
24-Jan-12 1.46
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25-Jan-12 0.48
27-Jan-12 0.92
30-Jan-12 -2.15
31-Jan-12 1.96
1-Feb-12 0.62
2-Feb-12 0.76
3-Feb-12 0.996-Feb-12 0.58
7-Feb-12 -0.48
8-Feb-12 0.48
9-Feb-12 0.7
10-Feb-12 -0.46
13-Feb-12 0.14
14-Feb-12 0.43
15-Feb-12 1.98
16-Feb-12 -0.27
17-Feb-12 0.75
21-Feb-12 0.76
22-Feb-12 -1.54
23-Feb-12 -0.37
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Sesa Goa
Balance
Sheet in Rs. Cr.
Mar '12 Mar '11 Mar '10 Mar '09 Mar '08
12 mths 12 mths 12 mths 12 mths 12 mths
Total Share
Capital 86.91 86.91 83.1 78.72 39.36
Equity Share
Capital 86.91 86.91 83.1 78.72 39.36
Share
Application
Money 0 0 0 0 0
Preference
ShareCapital 0 0 0 0 0
Reserves 12,826.28 11,501.90 7,125.61 4,439.06 2,751.77
Revaluation
Reserves 0 0 0 0 0
Networth 12,913.19 11,588.81 7,208.71 4,517.78 2,791.13
Secured
Loans 1.5 3.31 9.61 1.91 0
Unsecured
Loans 3,597.63 968.01 1,916.19 0 0
Total Debt 3,599.13 971.32 1,925.80 1.91 0
TotalLiabilities 16,512.32 12,560.13 9,134.51 4,519.69 2,791.13
Mar '12 Mar '11 Mar '10 Mar '09 Mar '08
12 mths 12 mths 12 mths 12 mths 12 mths
Gross Block 1,516.26 1,214.55 836.8 739.27 637.82
Less:
Accum.
Depreciation 523.27 454.68 324.65 281.27 239.73
Net Block 992.99 759.87 512.15 458 398.09
Capital Work
in Progress 817.45 654.15 68.01 48.19 15.85
Investments 14,420.62 9,463.81 5,478.64 3,019.68 2,000.44
Sources Of Funds
Application Of Funds
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Inventories 757.29 641.49 408.66 231.7 263.52
Sundry
Debtors 462.19 506.88 278.46 256.73 443.07
Cash and
Bank
Balance 72.01 193.32 27.41 12.17 13.16
Total Current
Assets 1,291.49 1,341.69 714.53 500.6 719.75
Loans and
Advances 326.35 1,295.45 1,155.04 1,108.34 54.33
Fixed
Deposits 0 698 2,350.00 0 0
Total CA,
Loans &
Advances 1,617.84 3,335.14 4,219.57 1,608.94 774.08
Deffered
Credit 0 0 0 0 0Current
Liabilities 1,129.80 1,245.53 768.83 375.8 219.98
Provisions 206.78 407.31 375.03 239.32 177.35
Total CL &
Provisions 1,336.58 1,652.84 1,143.86 615.12 397.33
Net Current
Assets 281.26 1,682.30 3,075.71 993.82 376.75
Miscellaneou
s Expenses 0 0 0 0 0
Total Assets 16,512.32 12,560.13 9,134.51 4,519.69 2,791.13
Contingent
Liabilities 3,302.30 2,656.43 2,200.12 1,734.52 740.14
Book Value
(Rs) 148.58 133.34 86.75 57.39 709.09
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Sesa Goa
Profit & Loss
account
in Rs.
Cr.
Mar '12 Mar '11 Mar '10 Mar '09 Mar '08
12 mths 12 mths 12 mths 12 mths 12 mths
Sales Turnover 7,086.50 8,289.34 5,302.94 5,074.71 3,571.78
Excise Duty 79.05 67.4 0 0 0
Net Sales 7,007.45 8,221.94 5,302.94 5,074.71 3,571.78
Other Income -11.27 472.3 437.74 60.76 99.51
Stock
Adjustments -48.56 12.13 130.97 38.44 29.2
Total Income 6,947.62 8,706.37 5,871.65 5,173.91 3,700.49
Raw Materials 1,219.20 1,178.32 824.8 662.18 560.88
Power & Fuel
Cost 16.76 14.97 11.79 10.57 10.55
Employee Cost 191.44 149.08 118.45 84.5 55.98
Other
Manufacturing
Expenses 345.5 577.97 392.58 170.12 85.82
Selling and
AdminExpenses 1,757.23 1,585.84 1,076.18 1,016.50 362.97
Miscellaneous
Expenses 129.79 14.53 18.08 6.41 27.26
Preoperative
Exp
Capitalised 0 0 0 0 0
Total
Expenses 3,659.92 3,520.71 2,441.88 1,950.28 1,103.46
Mar '12 Mar '11 Mar '10 Mar '09 Mar '08
12 mths 12 mths 12 mths 12 mths 12 mths
Operating
Profit 3,298.97 4,713.36 2,992.03 3,162.87 2,497.52
PBDIT 3,287.70 5,185.66 3,429.77 3,223.63 2,597.03
Interest 782.91 716.73 714.3 548.83 317.51
PBDT 2,504.79 4,468.93 2,715.47 2,674.80 2,279.52
Depreciation 83.85 83.13 57.38 44.1 42.58
Income
Expenditure
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Other Written
Off 0 0 0 0 0
Profit Before
Tax 2,420.94 4,385.80 2,658.09 2,630.70 2,236.94
Extra-ordinary
items 0 -9.85 0 0 0
PBT (Post
Extra-ord
Items) 2,420.94 4,375.95 2,658.09 2,630.70 2,236.94
Tax 741 953 540 688.21 744.94
Reported Net
Profit 1,679.94 3,432.80 2,118.09 1,942.49 1,492.00
Total Value
Addition 2,440.72 2,342.39 1,617.08 1,288.10 542.58
Preference
Dividend 0 0 0 0 0
EquityDividend 347.64 315.23 270.06 177.13 177.13
Corporate
Dividend Tax 7.92 51.18 45.9 30.1 30.1
Shares in
issue (lakhs) 8,691.01 8,691.01 8,309.62 7,872.40 393.62
Earning Per
Share (Rs) 19.33 39.5 25.49 24.67 379.05
Equity
Dividend (%) 400 350 325 225 450Book Value
(Rs) 148.58 133.34 86.75 57.39 709.09
Per share data
(annualised)
Source : Dion Global Solutions Limited
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Sesa Goa
Cash Flow
in Rs.
Cr.
Mar '12 Mar '11 Mar '10 Mar '09 Mar '08
12 mths 12 mths 12 mths 12 mths 12 mths
Net Profit Before
Tax 2420.94 4385.8 2658.09 2630.7 2236.94
Net Cash From
Operating
Activities 1538.58 2953.65 2003.48 2077.67 1306.87
Net Cash (used
in)/from
Investing
Activities
Net Cash (used
in)/fromFinancing
Activities 1692.63 -411.91 2706.14 -1138.96 -183.57
Net
(decrease)/incre
ase In Cash and
Cash
Equivalents -803.83 145.36 14.45 -1.16 -1.27
Opening Cash &
Cash
Equivalents 866.33 32.97 8.64 9.8 14.43
Closing Cash &Cash
Equivalents 62.5 178.33 23.09 8.64 13.16
-4035.04 -2396.38 -4695.17 -939.87 -1124.57
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FY12 FY13 FY14 FY15 FY16 FY17 FY18
4.00 4.699995 5.522494 6.48893 7.624493 8.958779 10.2578
Ke 17.36%
4.004909
4.009829
4.014755
4.0196874.024625
P17 359.1874
P12 181.4345