SAIL Q1-FY-13 Results: Higher profitability but lower revenues due to inventory build up

The quarter has seen mixed trends with lower revenues (inventory
buildup) but improving profitability on account of lower raw material costs.
Lower raw material costs and employee expenses helped the company report better
than expected results. Higher inventory will also impact the working capital
and negate the impact on account of the lower raw material costs.  

Q1FY13 result highlights

• Net sales for the quarter stood
  at Rs106.4bn.
• Operating profit (OP) stood at
  Rs 15.2bn. OP per tonne stood at Rs 5514 (Rs 4684 per tonne excluding
  additional wage provisioning impact)
• Lower than expected raw
  material costs and employee expenses partly offset by higher power expenses helped
  the company report strong profitability.
• Other income stood at Rs2.8bn.
  Depreciation and interest stood at Rs4.0bn and Rs1.2bn respectively.
• Forex loss for the quarter
  stood at Rs 2.6bn. The company has capitalized a forex loss of Rs 1.6bn. Net
  profit for the quarter stood at Rs 6.7bn.

Valuations: At the price of Rs 85, the stock trades at
a P/E of 9.6x FY13E EPS of Rs 8.9 and 8.3x FY14E EPS of Rs 10.2. It trades at
an Ev/Ebidta of 7.7x FY13E and 6.1xFY14E.

Source: MF Global