company

Accounting
P0/E0

Comparison with
One year Industry (P/E) forward Mkt expectations
P0/E1
for Company
growth

Valuation by
DDM(Multistage growth
model), Stock price(INR)

Free cash flow

Valuation(DCF),
Stock price(INR)

CIL

Market
Pessimistic
about growth

12.15 (ttm)

Sesa Goa
Hindalco
Nalco
Hindustan Zinc
.
.
.

8.93

4.5

18.14

Neutral

Undervalued

181.43

262.79

Valuation by
Multiples
P0/E1 and
EV/EBITDA

by P0/E1 :

by EV/EBITDA :

CMP in INR
on 29-082012

Technical analysis
(resistance/ support
levels) for 1 year

Resistance ~ 230 INR

172.6 Support ~ 180 INR

Top
brokerage/Equity
research agencies
recommendation

Angel Broking:
Neutral

Avendus: Buy
target price = 235
INR

Any recent significant

news impacting
Business prospectus

Proposed merger of
Sterlite Industries
(India) Limited with
Sesa Goa Limited,
pending for
regulatory and other
statutory approvals

Overall Stock
recommendation
undervalued

Neutral/Undervalued

g
Ke
DPS(FY18)=DPS(FY12)x(1+17.5%)^5x(1+10.94%)
P(FY17) = DPS(FY18)/(ke -g')
P(FY12) = DPS(FY12)x(1+g)x[{(1+g)/(1+ke)}^5-1]/(g-ke)+P(FY17)/(1+ke)^5

P0/E1 = (1-b)/(k-ROExb)

Multi stage growth model

FY13
FY14
17.50%
17.50%
17.36%
10.2578
359.1874
181.4345

e growth model
FY15
FY16
FY17
17.50%
17.50%
17.50% after FY17 constant growth model with g'

14.50%

Assuming no change in Beta (Risk of investor with Sesa Goa)

At g' = 14.5%, P(FY12) = 181.5, approx. equal to current market price

so we will be neutral on Sesa Goa as per DDM model
As g' = 14.5% is not so conservaative growth estimate

in Rs. Cr.
Net Cash From Operating Activities
Fixed assets Investment
Proceed from sales of Fixed assets
Net new Investment on Capacity
free cash flow (after tax CFO - new Investments)
YoY Growth rate in Free cash Flows %
Note:
Projected Growth rate g forever
Projected FCF for FY13 (g applied for 2 yrs on FY11 FCF)
Ke
PV of all future cash flows in FY12= FCF(FY13)/ (Ke - g) in rs. Cr
Value of Debt in FY12
Value of Equity in FY12
Shares in issue (lakhs)
Per Share Value(price) in rs

Mar '12

Mar '11

Mar '10

1538.58 2953.65 2003.48

481.41
837.29
131.59
1.97
4.3
0.36
479.44
832.99
131.23
1059.14 2120.66 1872.25
-50.06%
13.27%
-3.56%
FY12 can be treated as outlier in growth rate estimatio
8.00%
2473.538
17.36% Approximation: Although unleveraged beta
26438.45 Assuming all equity financing for capacity i
3,599.13
22,839.32
8,691.01
262.79 Even at conservative growth rate of g = 8%

Mar '09

Mar '08

2077.67
136.45
0.16
136.29
1941.38

1306.87

Note:

From particulars of Cash flow from Investing activities(Annual Repo

Purchase of fixed assets

Proceeds from sale of fixed assets
Net new Investment on Capacity

FY12
481.41
1.97
479.44

outlier in growth rate estimation as macroeconomic environment

tion: Although unleveraged beta should be used here, we are using same leveraged beta as in DDM for Ke estimation
all equity financing for capacity investments, as Debt(leverage) will add to PV by Tax shield

nservative growth rate of g = 8%, CMP = 172.6 shows stock is undervalued

sting activities(Annual Report)

FY11
FY10
FY09
837.29
131.59
136.45
4.3
0.36
0.16
832.99
131.23
136.29

Valuation by Multiples
one year Forward P0/E1
forward EV/EBITDA (FY13)
Stock Price by P0/E1
Stock price by EV/EBITDA

4.5
7.4

DDM
Dividend paid In Rs. Cr
Shares in issue (lakhs)
PAT
PAT growth rate
EPS in Rs.
DPS in Rs.
Dividend payout ratio
Retention ratio(b)
ROE
g= ROExb
Dividend growth rate( by DPS)
Stock price in Rs. on 29-08-2012
Accounting (P0/E0) on 29-08-2012
TTM, P/E
Industry P/E, on 29-08-2012
P0/E1 (2013f) (Angel broking)
P0/E1 (2013f)(Avendus)
Avg Stock Price P0, in Q1-13(approx.)
Projected E1 for 2013 by P0/E1

expected g after droping FY12 frm consideration

2 yr CAGR in E1 over FY11 earnings
ROE%(FY13) expectations (Angel Broking)
expected g for FY13 (Avendus) = (ROE13x b12)
ROE%(FY13) expectations (Avendus)
expected g for FY13 = (ROE13x b12)

Mar '12
Mar '11
Mar '10
347.64
315.23
270.06
8,691.01 8,691.01 8,309.62
1,679.94 3,432.80 2,118.09
-51.06%
62.07%
9.04%
19.33
39.50
25.49
4.00
3.63
3.25
20.7%
9.2%
12.8%
79.3%
90.8%
87.2%
13.0%
29.6%
29.4%
10.3%
26.9%
25.6%
10.3%
11.6%
44.4%
172.6
8.93

18.14
4.5
4.3
185
41.11
FY12 can be treated as outlier in growth rate estimation as macroeco
so if we eliminate FY12 then growth rate estimation on basis of past t

2.02%
22.30%
17.7%
0.22
17.45% These seems most reliable growth estimate
but certainly such a high growth couldnt la
so we will use multi stage growth model, fo

Mar '09
177.13
7,872.40
1,942.49
30.19%
24.67
2.25
9.1%
90.9%
43.0%
39.1%
-95.0%

Mar '08 Avg

177.13
393.62
1,492.00
379.05
45.00
11.9%
88.1%
53.5%
47.1%

12.7%
87.3%
33.7%
29.8%

th rate estimation as macroeconomic environment, huge forex losses to company like Sesa Goa
ate estimation on basis of past trends..as following:

s most reliable growth estimates as compared to other averages

y such a high growth couldnt last forever (Constant growth model)
se multi stage growth model, for 5 years g = 17.5% and after that constant growth let say g' = 15%

Rm
beta
Rf (364 days T-bill)
Rm
Ke

Daily avg avg over 20 yrs

1.56
8.12%
14.04%
17.36%

20.30%
27.12%

CAGR

11.03%
12.65%

Time Period: 22 Feb-11 to 23 Feb-12, 250 days (Sat and Sun BSE off)
Average Mkt rate(Rmt), daily
0.04%
return
Annual Mkt return(Rmt), 14.04%
annual
by compounding daily rate over 365 days

20
20
20
20
20
20
20

t and Sun BSE off)

ounding daily rate over 365 days

Historical BSE Sensex yoy Returns

Year
close
return
1991
1908
0.9103
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011

2615
3346
3927
3110
3085
3659
3055
5006
3972
3262
3377
5839
6603
9398
13787
20287
9647
17465
20509
15455

0.370545073
0.279541109
0.173640167
-0.208046855
-0.008038585
0.186061588
-0.165072424
0.638625205
-0.206552137
-0.178751259
0.035254445
0.729049452
0.130844323
0.423292443
0.467014258
0.47145862
-0.524473801
0.810407381
0.17429144
-0.246428397
Avg. YoY
CAGR

20.30%
11.03%

4-A
5-A
6-A
7-A
8-A
11-A
13-A
15-A
18-A
19-A
20-A
21-A
25-A
26-A

27-A
28-A
29-A
2-M
3-M
4-M
5-M
6-M
9-M
10-M
11-M
12-M
13-M
16-M
17-M
18-M
19-M
20-M
23-M
24-M
25-M
26-M
27-M
30-M
31-M
1-Ju
2-Ju
3-Ju
6-Ju
7-Ju
8-Ju
9-Ju
10-Ju
13-Ju
14-Ju
15-Ju
16-Ju
17-Ju
20-Ju
21-Ju
22-Ju
23-Ju
24-Ju
27-Ju
28-Ju
29-Ju
30-Ju

1-J
4-J
5-J
6-J
7-J
8-J
11-J
12-J
13-J
14-J
15-J
18-J
19-J
20-J
21-J
22-J
25-J
26-J
27-J
28-J
29-J
1-A
2-A
3-A
4-A
5-A
8-A
9-A
10-A
11-A
12-A
16-A
17-A
18-A
19-A
22-A
23-A
24-A
25-A
26-A
29-A
30-A
2-S
5-S
6-S
7-S
8-S

9-S
12-S
13-S
14-S
15-S
16-S
19-S
20-S
21-S
22-S
23-S
26-S
27-S
28-S
29-S
30-S
3-O
4-O
5-O
7-O
10-O
11-O
12-O
13-O
14-O
17-O
18-O
19-O
20-O
21-O
24-O
25-O
26-O
28-O
31-O
1-N
2-N
3-N
4-N
8-N
9-N
11-N
14-N
15-N
16-N
17-N
18-N

21-N
22-N
23-N
24-N
25-N
28-N
29-N
30-N
1-D
2-D
5-D
7-D
8-D
9-D
12-D
13-D
14-D
15-D
16-D
19-D
20-D
21-D
22-D
23-D
26-D
27-D
28-D
29-D
30-D
2-J
3-J
4-J
5-J
6-J
7-J
9-J
10-J
11-J
12-J
13-J
16-J
17-J
18-J
19-J
20-J
23-J
24-J

25-J
27-J
30-J
31-J
1-F
2-F
3-F
6-F
7-F
8-F
9-F
10-F
13-F
14-F
15-F
16-F
17-F
21-F
22-F
23-F

Mkt. return
BSE sensex return

Date

Rmt
22-Feb-11
23-Feb-11
24-Feb-11
25-Feb-11
28-Feb-11
1-Mar-11
3-Mar-11
4-Mar-11
7-Mar-11
8-Mar-11
9-Mar-11
10-Mar-11
11-Mar-11
14-Mar-11
15-Mar-11
16-Mar-11
17-Mar-11
18-Mar-11
21-Mar-11
22-Mar-11
23-Mar-11
24-Mar-11
25-Mar-11
28-Mar-11
29-Mar-11
30-Mar-11
31-Mar-11
1-Apr-11
4-Apr-11
5-Apr-11
6-Apr-11
7-Apr-11
8-Apr-11
11-Apr-11
13-Apr-11
15-Apr-11
18-Apr-11
19-Apr-11
20-Apr-11
21-Apr-11
25-Apr-11
26-Apr-11

-0.77
-0.64
-3
0.39
0.69
3.5
0.23
-0.02
-1.43
1.19
0.16
-0.77
-0.84
1.46
-1.47
1.05
-1.14
-1.49
-0.22
0.84
1.21
0.79
2.53
0.68
0.94
0.89
0.8
-0.13
1.45
-0.08
-0.38
-0.11
-0.71
-0.97
2.25
-1.57
-1.53
0.16
1.83
0.67
-0.09
-0.2

27-Apr-11
28-Apr-11
29-Apr-11
2-May-11
3-May-11
4-May-11
5-May-11
6-May-11
9-May-11
10-May-11
11-May-11
12-May-11
13-May-11
16-May-11
17-May-11
18-May-11
19-May-11
20-May-11
23-May-11
24-May-11
25-May-11
26-May-11
27-May-11
30-May-11
31-May-11
1-Jun-11
2-Jun-11
3-Jun-11
6-Jun-11
7-Jun-11
8-Jun-11
9-Jun-11
10-Jun-11
13-Jun-11
14-Jun-11
15-Jun-11
16-Jun-11
17-Jun-11
20-Jun-11
21-Jun-11
22-Jun-11
23-Jun-11
24-Jun-11
27-Jun-11
28-Jun-11
29-Jun-11
30-Jun-11

-0.49
-0.81
-0.81
-0.72
-2.44
-0.35
-1.4
1.69
0.05
-0.09
0.39
-1.34
1.07
-1.01
-1.13
-0.28
0.31
1.02
-1.82
0.1
-0.91
1.11
1.23
-0.19
1.49
0.57
-0.62
-0.64
0.24
0.41
-0.55
-0.05
-0.63
-0.01
0.23
-0.96
-0.81
-0.64
-2.04
0.31
-0.06
1.01
2.89
0.94
0.43
1.09
0.81

1-Jul-11
4-Jul-11
5-Jul-11
6-Jul-11
7-Jul-11
8-Jul-11
11-Jul-11
12-Jul-11
13-Jul-11
14-Jul-11
15-Jul-11
18-Jul-11
19-Jul-11
20-Jul-11
21-Jul-11
22-Jul-11
25-Jul-11
26-Jul-11
27-Jul-11
28-Jul-11
29-Jul-11
1-Aug-11
2-Aug-11
3-Aug-11
4-Aug-11
5-Aug-11
8-Aug-11
9-Aug-11
10-Aug-11
11-Aug-11
12-Aug-11
16-Aug-11
17-Aug-11
18-Aug-11
19-Aug-11
22-Aug-11
23-Aug-11
24-Aug-11
25-Aug-11
26-Aug-11
29-Aug-11
30-Aug-11
2-Sep-11
5-Sep-11
6-Sep-11
7-Sep-11
8-Sep-11

-0.44
0.28
-0.37
-0.09
1.88
-1.15
-0.72
-1.65
1
0.12
-0.3
-0.3
0.79
-0.81
-0.36
1.55
0.8
-1.87
-0.46
-1.21
-0.07
0.64
-1.12
-0.94
-1.38
-2.19
-1.82
-0.78
1.62
-0.42
-1.29
-0.65
0.66
-2.2
-1.99
1.24
0.96
-1.29
-0.85
-1.84
3.58
1.59
0.87
-0.64
0.89
1.2
0.59

9-Sep-11
12-Sep-11
13-Sep-11
14-Sep-11
15-Sep-11
16-Sep-11
19-Sep-11
20-Sep-11
21-Sep-11
22-Sep-11
23-Sep-11
26-Sep-11
27-Sep-11
28-Sep-11
29-Sep-11
30-Sep-11
3-Oct-11
4-Oct-11
5-Oct-11
7-Oct-11
10-Oct-11
11-Oct-11
12-Oct-11
13-Oct-11
14-Oct-11
17-Oct-11
18-Oct-11
19-Oct-11
20-Oct-11
21-Oct-11
24-Oct-11
25-Oct-11
26-Oct-11
28-Oct-11
31-Oct-11
1-Nov-11
2-Nov-11
3-Nov-11
4-Nov-11
8-Nov-11
9-Nov-11
11-Nov-11
14-Nov-11
15-Nov-11
16-Nov-11
17-Nov-11
18-Nov-11

-1.74
-2.17
-0.21
1.47
1
0.34
-1.11
2.11
-0.2
-4.13
-1.22
-0.69
2.95
-0.47
1.53
-1.46
-1.84
-1.77
-0.46
2.79
2
-0.13
2.55
-0.44
1.18
-0.34
-1.63
2.01
-0.87
-0.89
0.92
1.86
0.2
2.98
-0.56
-1.27
-0.09
0.1
0.46
0.04
-1.18
-0.97
-0.43
-1.38
-0.63
-1.87
-0.55

21-Nov-11
22-Nov-11
23-Nov-11
24-Nov-11
25-Nov-11
28-Nov-11
29-Nov-11
30-Nov-11
1-Dec-11
2-Dec-11
5-Dec-11
7-Dec-11
8-Dec-11
9-Dec-11
12-Dec-11
13-Dec-11
14-Dec-11
15-Dec-11
16-Dec-11
19-Dec-11
20-Dec-11
21-Dec-11
22-Dec-11
23-Dec-11
26-Dec-11
27-Dec-11
28-Dec-11
29-Dec-11
30-Dec-11
2-Jan-12
3-Jan-12
4-Jan-12
5-Jan-12
6-Jan-12
7-Jan-12
9-Jan-12
10-Jan-12
11-Jan-12
12-Jan-12
13-Jan-12
16-Jan-12
17-Jan-12
18-Jan-12
19-Jan-12
20-Jan-12
23-Jan-12
24-Jan-12

-2.6
0.75
-2.27
1.01
-1.03
3.01
-0.98
0.72
2.23
2.2
-0.25
0.43
-2.3
-1.67
-2.12
0.83
-0.76
-0.28
-2.18
-0.72
-1.33
3.36
0.82
-0.47
1.47
-0.61
-0.92
-1.17
-0.57
0.41
2.72
-0.36
-0.16
0.07
-0.12
-0.22
2.22
0.07
-0.86
0.73
0.22
1.71
-0.09
1.17
0.57
0.08
1.46

25-Jan-12
27-Jan-12
30-Jan-12
31-Jan-12
1-Feb-12
2-Feb-12
3-Feb-12
6-Feb-12
7-Feb-12
8-Feb-12
9-Feb-12
10-Feb-12
13-Feb-12
14-Feb-12
15-Feb-12
16-Feb-12
17-Feb-12
21-Feb-12
22-Feb-12
23-Feb-12

0.48
0.92
-2.15
1.96
0.62
0.76
0.99
0.58
-0.48
0.48
0.7
-0.46
0.14
0.43
1.98
-0.27
0.75
0.76
-1.54
-0.37

Sesa Goa
Balance
Sheet

in Rs. Cr.
Mar '12

Mar '11

Mar '10

Mar '09

Mar '08

12 mths

12 mths

12 mths

12 mths

12 mths

86.91

86.91

83.1

78.72

39.36

86.91

86.91

83.1

78.72

39.36

0
12,826.28

0
11,501.90

0
7,125.61

0
4,439.06

0
2,751.77

0
12,913.19

0
11,588.81

0
7,208.71

0
4,517.78

0
2,791.13

1.5

3.31

9.61

1.91

3,597.63
3,599.13

968.01
971.32

1,916.19
1,925.80

0
1.91

0
0

16,512.32
Mar '12

12,560.13
Mar '11

9,134.51
Mar '10

4,519.69
Mar '09

2,791.13
Mar '08

12 mths

12 mths

12 mths

12 mths

12 mths

Gross Block

1,516.26

1,214.55

836.8

739.27

637.82

Less:
Accum.
Depreciation
Net Block

523.27
992.99

454.68
759.87

324.65
512.15

281.27
458

239.73
398.09

Capital Work
in Progress

817.45

654.15

68.01

48.19

15.85

14,420.62

9,463.81

5,478.64

3,019.68

2,000.44

Sources Of Funds
Total Share
Capital
Equity Share
Capital
Share
Application
Money
Preference
Share
Capital
Reserves
Revaluation
Reserves
Networth
Secured
Loans
Unsecured
Loans
Total Debt
Total
Liabilities

Application Of Funds

Investments

Inventories
Sundry
Debtors
Cash and
Bank
Balance

757.29

641.49

408.66

231.7

263.52

462.19

506.88

278.46

256.73

443.07

72.01

193.32

27.41

12.17

13.16

1,291.49

1,341.69

714.53

500.6

719.75

326.35

1,295.45

1,155.04

1,108.34

54.33

698

2,350.00

1,617.84

3,335.14

4,219.57

1,608.94

774.08

1,129.80
206.78

1,245.53
407.31

768.83
375.03

375.8
239.32

219.98
177.35

1,336.58

1,652.84

1,143.86

615.12

397.33

281.26

1,682.30

3,075.71

993.82

376.75

Miscellaneou
s Expenses

Total Assets

16,512.32

12,560.13

9,134.51

4,519.69

2,791.13

3,302.30

2,656.43

2,200.12

1,734.52

740.14

148.58

133.34

86.75

57.39

709.09

Total Current
Assets
Loans and
Advances
Fixed
Deposits
Total CA,
Loans &
Advances
Deffered
Credit
Current
Liabilities
Provisions
Total CL &
Provisions
Net Current
Assets

Contingent
Liabilities
Book Value
(Rs)

Sesa Goa
Profit & Loss
account

in Rs.
Cr.
Mar '12

Mar '11

Mar '10

Mar '09

Mar '08

12 mths

12 mths

12 mths

12 mths

12 mths

Income
Sales Turnover 7,086.50 8,289.34 5,302.94 5,074.71 3,571.78
Excise Duty
79.05
67.4
0
0
0
Net Sales
7,007.45 8,221.94 5,302.94 5,074.71 3,571.78
Other Income
-11.27
472.3
437.74
60.76
99.51
Stock
Adjustments
-48.56
12.13
130.97
38.44
29.2
Total Income
6,947.62 8,706.37 5,871.65 5,173.91 3,700.49
Expenditure
Raw Materials
Power & Fuel
Cost

1,219.20 1,178.32
16.76

14.97

824.8

662.18

560.88

11.79

10.57

10.55

Employee Cost
191.44
149.08
118.45
84.5
55.98
Other
Manufacturing
Expenses
345.5
577.97
392.58
170.12
85.82
Selling and
Admin
Expenses
1,757.23 1,585.84 1,076.18 1,016.50
362.97
Miscellaneous
Expenses
129.79
14.53
18.08
6.41
27.26
Preoperative
Exp
Capitalised
0
0
0
0
0
Total
Expenses
3,659.92 3,520.71 2,441.88 1,950.28 1,103.46
Mar '12 Mar '11 Mar '10 Mar '09 Mar '08
12 mths
Operating
Profit
PBDIT
Interest
PBDT
Depreciation

12 mths

12 mths

12 mths

12 mths

3,298.97 4,713.36 2,992.03 3,162.87 2,497.52

3,287.70 5,185.66 3,429.77 3,223.63 2,597.03
782.91
716.73
714.3
548.83
317.51
2,504.79 4,468.93 2,715.47 2,674.80 2,279.52
83.85
83.13
57.38
44.1
42.58

Other Written
Off
Profit Before
Tax
Extra-ordinary
items
PBT (Post
Extra-ord
Items)
Tax
Reported Net
Profit
Total Value
Addition
Preference
Dividend
Equity
Dividend
Corporate
Dividend Tax
Per share data
(annualised)
Shares in
issue (lakhs)
Earning Per
Share (Rs)
Equity
Dividend (%)
Book Value
(Rs)

2,420.94 4,385.80 2,658.09 2,630.70 2,236.94

-9.85

2,420.94 4,375.95 2,658.09 2,630.70 2,236.94

741
953
540
688.21
744.94
1,679.94 3,432.80 2,118.09 1,942.49 1,492.00
2,440.72 2,342.39 1,617.08 1,288.10

542.58

347.64

315.23

270.06

177.13

177.13

7.92

51.18

45.9

30.1

30.1

8,691.01 8,691.01 8,309.62 7,872.40

393.62

19.33

39.5

25.49

24.67

379.05

400

350

325

225

450

148.58

133.34

86.75

57.39

709.09

Source : Dion Global Solutions Limited

Sesa Goa
Cash Flow

in Rs.
Cr.
Mar '12

Mar '11

Mar '10

Mar '09

Mar '08

12 mths

12 mths

12 mths

12 mths

12 mths

Net Profit Before

Tax
2420.94
4385.8 2658.09
2630.7 2236.94
Net Cash From
Operating
Activities
1538.58 2953.65 2003.48 2077.67 1306.87
Net Cash (used
in)/from
Investing
Activities
-4035.04 -2396.38 -4695.17 -939.87 -1124.57
Net Cash (used
in)/from
Financing
Activities
1692.63 -411.91 2706.14 -1138.96 -183.57
Net
(decrease)/incre
ase In Cash and
Cash
Equivalents
-803.83
145.36
14.45
-1.16
-1.27
Opening Cash &
Cash
Equivalents
866.33
32.97
8.64
9.8
14.43
Closing Cash &
Cash
Equivalents
62.5
178.33
23.09
8.64
13.16

FY12
Ke

FY13
FY14
FY15
FY16
FY17
FY18
4.00 4.699995 5.522494 6.48893 7.624493 8.958779 10.2578

17.36%
4.004909
4.009829
4.014755
4.019687
4.024625

P17
P12

359.1874
181.4345