SESA STERLITE LIMITED

COMPANY PROFILE

Founded in 1954, Sesa Sterlite is India’s largest producer and exporter of iron ore in private sector. The Company is en- gaged in business of exploration, mining and processing of iron ore. Sesa's iron ore markets/customers are primarily located in geographies of China, India, Japan, Korea, Europe and other Asian countries. Sesa Sterlite Ltd is part of Vedanta Re- sources plc, the London-listed FTSE 100 diversified metals and mining major. In August 2011, Sesa acquired 51% stake in Western Cluster Limited, Liberia. WCL has mining inter- ests / rights in the Western Cluster iron ore project in Liberia with a potential reserves and resources of over 1 bn tonnes.

As of 31 March 2012, Sesa Sterlite Ltd owns or has rights to reserves and resources of 306 million tonnes of iron ore; which has been independently reviewed and certified as per Joint Ore Re- serves Committee (JORC) stanards. On 20 September 2013, the name of Sesa Goa Limited has been changed to Sesa Sterlite Limited. The change of name is consequent to the approval of the Scheme of amalgamation and arrangement amongst Sterlite Industries (India) Limited, Madras Alumin- ium Company Limited, Sterlite Energy Limited, Vedanta Alu- minium Limited and Sesa Goa Limited.

STOCK INFORMATION

STOCK PRICE

202.35

TARGET PRICE

210-220

SECTOR

MINING & MINIRALS

SYMBOL (AT NSE)

SSLT

ISIN

INE205A01025

FACE VALUE (IN RS.)

1.00

BSE CODE

500295

STOCK FUNDAMENTALS

MARKET CAP

59,797.88

BOOK VALUE

113.60

EPS - (TTM) (IN RS. CR.)

3.47

P/E

58.13

INDUSTRY P/E

14.72

INVESTMENT RATIONALE

Despite headwind of weaker prices of key commodities, management emphasized the focus on free cash generation through (1) capex optimization, primarily at Cairn India and Zinc International, (2) opex reduction, (3) asset sweating, (4) USD500m of additional annual margin in marketing over four years (USD250m in FY16), (5) USD800m of efficiencies in pro- curement over four years (USD300m in FY16) and production ramp up at stranded aluminum and power assets aided by the recently-acquired coal mines in the e-auction. Capital allocation will be towards high IRR projects in zinc and oil businesses. Asset sweating rather than capex will be the fo- cus on over-invested aluminum and power assets. Produc- tion outlook has improved as regulatory approvals have started to come.

SHAREHOLDING PATTERN

OUTLOOK & VALUATION

We believe that SSLT’s low cost and diversified portfolio of commodities, new leadership, focus on asset sweating, eas- ing of regulatory environment all augur well for growth. We maintain a positive outlook on aluminum and zinc prices. Eventual merger of cash rich subsidiaries will de-stress the balance sheet and re-rate the stock. Maintain Buy on SSLT.

RESULTS (Quarterly )(Rs CR.)

 

DEC' 14

SEP' 14

JUN' 14

MAR 14

DEC' 13

Sales

8,631.55

8,735.25

7,135.80

8,933.13

8,274.66

Operat- ing profit

1,450.50

1,300.56

886.44

962.78

981.80

Interest

851.57

996.42

985.33

966.26

946.31

Gross profit

666.46

1,328.64

569.69

111.52

809.05

EPS (Rs)

0.87

3.12

0.57

-1.10

2.89

TECHNICAL VIEW

SSLT FUTURE is looking strong on charts, long build up has been seen, we may see more upside, if it sustains above 200 levels. We advise buying around 195-200 lev- els with strict stop loss of 185 for the targets of 210-220.

SYMBOL

VALUE

ACTION

RSI(14)

73.265

BUY

STOCH(9,6)

70.147

BUY

STOCHRSI(14)

100.000

OVERBOUGHT

MACD(12,26)

2.410

BUY

ADX(14)

42.595

BUY

WILLIAMS %R

-8.108

OVERBOUGHT

CCI(14)

138.8583

BUY

ATR(14)

1.8714

HIGH VOLATILITY

HIGH/LOWS(14)

4.7893

BUY

ULTIMATE OSCILLATOR

66.311

BUY

ROC

4.899

BUY

BULL/BEAR POWER()13

7.2420

BUY

BUY: 9 SELL: 0 NEUTRAL: 2

SUMMARY : STRONG BUY

Our Other Recommendation for Next Week

SCRIP

ACTION

CMP

ENTRY

SL

TGT

TIME FRAME

TATA STEEL

BUY

347.5

340-345

330

355-370

ONE WEEK

ASIAN PAINT

BUY

855.5

845-855

835

865-880

ONE WEEK

VOLTAS

BUY

307.85

304-308

300

312-316

ONE WEEK

SBIN

BUY

281.65

278-280

274

284-288

ONE WEEK

RECL

BUY

346.15

340-345

332

352-360

ONE WEEK

Performance of Previous Week

SCRIP

LOT

ACTION

ENTRY

SL

TGT

P&L

REMARK

CLOSE / LOW/ HIGH

HCLTECH

250

SELL

940-950

975

920-900

5000.00

FIRST TGT HIT

962.75 / 916.15

BHEL

1000

SELL

230-235

240

225-220

0.00

AT COST

232.05 / 226.10

AUROPHARMA

250

BUY

1220-1240

1195

1260-290

0.00

NOT OPEN

1330.35 /1271.90

BHARAT FORGE

250

BUY

1310-1325

1290

1345-375

5000.00

FIRST TGT HIT

1326.40/1372.00

TVS MOTOR

1000

SELL

260-264

269

255-250

10000.00

BOTH TGTHIT

340.05 / 341.50

NET PROFIT

 

 

 

 

 

20000.00

 

 

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DISCLAIMER

This report is only for the information of our customers. Recommendations, opinions, or suggestions are given with the understanding that readers acting on this information assume all risks involved. The information provided herein is not to be construed as an offer to buy or sell securities of any kind. ATS and/or its group companies do not as assume any responsibility or liability resulting from the use of such information.

 

 

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