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Bhushan steel ltd

Bhushan steel ltd

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Published by Arpita Mukherjee
Fianacial statement analysis
Fianacial statement analysis

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Published by: Arpita Mukherjee on Oct 30, 2013
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10/30/2013

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FINANCIAL STATEMENT ANALYSIS AND RESEARCH

REPORT ON BHUSHAN STEEL LTD.

Submitted To: Dr. Pawan Jain

Submitted By: Saurabh Singhal (2012282)

26% up from April 2013 price. Coking coal prices have decreased by 19. JSW steel (Rs.Incorporated in January 1983. The company is the largest auto-grade steelmaker in India and specializes in manufacturing value-added flat products. 30. Bhushan Steel is India’s third largest secondary steel producing company with an existing steel production capacity of 2. 15. The iron ore prices have increased by almost 33% from a level of $101/ton to $133/ton from September last year. which is quite consistent with the Sensex that also increases by 5.2mn tonne.93% since April this year.00 40. The decline in sales is majorly in domestic sales that fall by 17. It has three manufacturing units in the states of Uttar Pradesh (Sahibabad Unit). 480.000.40 per share which is 5.00 20.583 crores). Raw material accounts for nearly 53% of sales and 72% of total expenditure. The market cap of Bhushan steel is closer to its next competitor i. For First quarter of FY2014.e.00 0. and Orissa (Meramandali unit) in India and has a sales network across many countries. Bhushan Steel reported a decline in top-line of 13. Any further hike in raw material prices would dent the margins to the tune of 3-5%. The operating and net profit has also been consistently increasing for the company.25%. however. its bottom-line declined 62.000. Maharashtra (Khopoli unit).000.000.00 15000 10000 5000 0 Operating Profit Bhushan JSW TATA Bhushan JSW TATA Bhushan steel has been growing at a rate of over 18% a year effectively from 2008 onwards.33% QoQ.00 30.790 crores) while still quite behind that of TATA steel (Rs.000.858 crores with the current market price of Rs. Sales Turnover 50. 10.33% to $65/ton from the levels of $80/ton.75% while export sales have increased by 10. The market capitalization of Bhushan Steel is Rs.97% QoQ due to higher depreciation and interest costs.00 10. EPS 250 200 150 100 50 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Bhushan JSW TATA 8000 6000 4000 2000 0 Net profit Bhushan JSW TATA .

the stock is trading at 7. A complete pass.5 MTPA HRC plant under Odisha phase III expansion is running on track and is expected to commission by October 2013.97% YoY to Rs.   During the quarter the company commissioned 0. The 2.45 mtpa CRM in Odisha which is under trial and run process. . Bhushan Steel which primarily caters to auto manufactures is likely to be affected by high interest. Bhushan Steel has nearly doubled its steel capacity over the past five years.34 x) company board has approved the fund raising plan of INR 7 bn through the rights issue. Adding to that high interest rate scenario is prevailing in the industry. We believe company to deliver better performance on the back of higher capacity along with better product mix and recommend ACCUMULATE on the stock with a price target of INR 510.Future Prospects:  Steel manufactures have hiked steel prices nearly 21% during the last four months. At current market price. higher interest expenses and abrupt raw material supply at Odisha would be a major concern for the company going forward but company’s strategic moves towards financial restructuring and initiatives towards captive raw material sourcing may provide some relief going forward.76cr. its high leverage remain as the matter of concern. expected in FY14 FY15. both on forward as well as backward integration which may provide it a high growth trajectory.3 mtpa coke oven. as the demand for auto grade steel is expected to slow down. Further.10% YoY to Rs. This would result in lower interest expenses and considered as a positive development in the long run. The benefits of its phase III expansion is expected to be witnessed during FY2014-15 with strong volume growth. However. thereby leaving little scope for further hikes.402cr due to increase in debt. Consequently. the company is setting up 1.8 mtpa CRM in Odisha. 197MW CPP and 1. the reported net profit decreased by 62.63% YoY to Rs.through to final steel consumers remains unlikely. Depreciation expense increased 13. that means steel producers may have to bite into their margins for the next two quarters.3x FY13E EV/ EBITDA which seems to be at the lower end considering the product basket and the expansion plans. However. Considering the highly leveraged balance sheet (Total debt of INR 200 bn with a D/E of 4. Recommendation: The company is continuously focusing. Interest expenses also increased 6.233cr on account of increased capacity.

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