Tata Sponge Iron Q3FY17: Firstcall are overweight for medium to long term investment

Firstcall India Equity | May 18, 2016, midnight


SYNOPSIS

  • Tata Sponge Iron Limited is engaged in the production of sponge iron by direct reduction method of iron ore and generation of power from waste heat.
  • During Q3 FY17, consolidated net profit jumps to Rs. 109.70 mn from Rs. 52.50 mn in Q3 FY16, an increase of 108.95%.
  • Consolidated revenue for the quarter stood at Rs. 1575.80 mn as against Rs. 1545.90 mn, when compared with the prior year period.
  • During Q3 FY17, consolidated EBIDTA is Rs. 193.60 mn as against Rs. 105.90 mn in Q3 FY16, grew by 82.81%.
  • During the quarter EBIDTA margins are expanded by 544 basis points from previous same period.
  • During Q3 FY17, consolidated PBT increased by 131.56% to Rs. 152.60 mn from Rs. 65.90 mn in Q3 FY16.
  • EPS of the company stood at Rs. 7.12 a share during the quarter, as against Rs. 3.41 per share over previous year period.
  • During 9 months ended of FY17, Net sales and Net profit stood at Rs. 4301.20 mn and Rs. 375.80 mn, respectively.


OUTLOOK AND CONCLUSION

  • At the current market price of Rs.621.50, the stock P/E ratio is at 18.85 x FY17E and 16.09 x FY18E respectively.
  • Earning per share (EPS) of the company for the earnings for FY17E and FY18E is seen at Rs. 32.98 and Rs. 38.63 respectively.
  • On the basis of EV/EBITDA, the stock trades at 4.78 x for FY17E and 3.91 x for FY18E.
  • Price to Book Value of the stock is expected to be at 1.12 x and 1.04 x for FY17E and FY18E respectively.
  • Hence, we say that, we are Overweight in this particular scrip for Medium to Long term investment.

 

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