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SAIL Second Quarter Result Disappoints, net profit down 34%

By Bhaveek Patel Leave a Comment

India’s second largest steel company Steel Authority of India (SAIL) has announced its second quarter (ended September 2010) results today. The company has reported a net profit of Rs.1,090 cr as against Rs.1,660 cr last quarter, down 34.34% on year-on-year basis (YoY). Net sales jumped 6.63% to Rs.10,603 cr from Rs.9,944 cr (Year on year basis). Also, Earning before interest, depreciation, tax and amortisation (EBIDTA) declined at 15.68% versus 23.8% (YoY) and 20.18% (QoQ) respectively, while market expectation was at 17%. Margin was lower than expected due to higher coking coal prices & increase in wage. Coking coal has increased by 76% to USD 225/tonne. Production increased to 3.17 MT versus 3.08 MT (YoY) and 3 MT (QoQ). hence, the numbers were below expectations.

In a press conference today, the following was said by company’s management:

-Our net profit was down, due to rise in coking coal prices.
-Total sales numbers ware overall good and as we expected.
-This quarter, average coking coal was priced at USD 225/t versus USD 128/t (YoY)
-We have plans to spend Rs.70,000 crore on modernisation.
-We expect to cross Rs.12,254 crore FY-11 capex.
-This quarter(Q2) sales were at its, highest-ever in quarter.
-Our FPO should hit markets by January/February.
-Global steel prices are likely to be stable.

Our Trading Analysis: We have seen the entire steel sector ralling on strong appreciation on dollar, from november we will see a cooldown in this rally. Sail has been a very selective stock for most of the fund amangers. As per our analysis, We see SAIL to trade near 185 to 195, this can be taken as a buying opportunity, for target 224 / 252. Stop loss should be placed at Rs.180 levels.

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Category: Results Tags: Results/ SAIL/ Short term Stocks

About Bhaveek Patel

Bhaveek Patel is one of the most successful traders, technical analyst, and investor, his areas of interest include stock market, forex, and gold trading. Apart from this, he is often seen in the golf course. He is having more than 10 years of experience in trading, had placed his first order on 19 June 2006 with IndiaInfoline.

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