| Corus visibility not shrouded: Despite Corus disappointing consensusestimates, we believe the results were not far out of line, with realisations yet to reflect the May buoyancy. Going forward, iron-ore costs are likely to increase by ~US$40-50 in 2Q but should be offset with a similar increase in realisations resulting in EBIDTA/tonne sustaining at US$70-80 levels.
Management commentary suggests likely improvements in delivery in 3Q post a seasonal slackness and purchase postponement. We believe our annual EBIDTA/tonne estimate of US$54 for Corus are at no significant risk.
Domestic business on a strong footing: The Indian operations enjoyed an EBIDTA/tonne of US$453 in 1QFY11 even though deliveries at 1.39mt suffered from an industry-wide slowdown. Going forward, deliveries should improve which will help counter lower realisations. Even a moderate dip in profitability leaves sufficient headroom to our FY11 EBIDTA/tonne estimate of US$340 for domestic operations. Valuations attractive; we retain BUY: remains far improved despite prevailing macro concerns and assuming no significant improvement in steel prices from current levels. Valuations Safe Harbor Statement: Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints. Nothing in this article is, or should be construed as, investment advice. |
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