template stock recommendationsesa

7/27/2019 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



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.



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



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.



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

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