CMP Rs. 27. Usha Martin Limited. Iron & Steel. Key highlights of the quarter and FY12

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1 Iron & Steel CMP Rs. 27 May 1, 212 BSE Code BSE ID USHAMARTIN High/Low 1Y (Rs.) 6 / 22 Avg. vol (3m) 122,74 Market Cap (Rs Cr) 812 Net IB Debt (Rs Cr) 1,943 Enterprise value(rs Cr) 2,755 Shareholding % Dec-11 Mar-12 Promoters MFs/ Fis/ Banks FIIs Public & Others Stock Chart ( Relative to Sensex) May-11 1-Nov-11 1-May-12 Usha Martin Sensex Stock Perfm.(%) 1M 6M 1Yr Absolute (15.9) (14.6) (55.6) Rel. to Sensex (11.2) (9.2) (44.3) Financials (Rs.Cr) FY1 FY11 FY12 Revenue 2,54 3,45 3,361 y-o-y -14.4% 19.9% 1.4% EBITDA y-o-y -6.8% 11.5% -21.4% PAT EPS (Dil.) y-o-y -12.8% -3.3% -97.3% EBITDA Margin 19.5% 18.1% 12.9% PAT Margin 6.6% 4.5%.1% D/E(x).6x.8x 1.1x P/E(x) 4.1x 5.9x 222.1x EV/EBITDA(x) 4.5x 4.x 5.1x ROCE 13.6% 11.2% 5.5% ROE 1.% 7.7%.2% Financial year ends at March 31 Annual Financials are on consolidated basis Qtry Fin 6/11 9/11 12/11 3/12 Net Sales PAT EPS Quarterly Financials are on consolidated basis Usha Martin Limited FY12 & Q4FY12 Results Review Usha Martin reported consolidated FY12 total revenue of Rs. 3,36.8 crore at a reasonable Y-o-Y growth of 9.7%. This growth was primarily triggered by increased sales realisation of around 1.3% on Y-o-Y basis. Moreover, commencement of partial production at Usha Siam, which remained nonoperational since October 211, also impacted revenue positively. Bottomline performance was significantly hampered due to rise in raw material, power & fuel and interest costs despite rise in other income. Diluted EPS came down to Rs..12 in FY12 from Rs. 4.5 in FY11. The revenue in Q4FY12 grew 9.9% Y-o-Y to Rs crore. However, EBITDA margin and net profit margin declined by 11.2% and 2.7% respectively. Increased cost of coke, buying coal at higher rates and higher competition in steel business affected the operating margins. The company s subsidiaries reported mixed performance during the quarter. Revenue at the company s subsidiaries plunged by 16% Y-o-Y to Rs crores, however net profit jumped significantly by 353.5% at Rs crore. Key highlights of the quarter and FY12 Revenue inched up by 9.9% Y-o-Y in Q4FY12 The Steel segments registered Y-o-Y growth of 13.5% while wire and wire ropes saw 1% decline. Revenue contribution from the international business was adversely affected by sluggish growth in developed countries like Europe. EBITDA margins plunged severely in Q4FY12 EBITDA margins declined considerably to 7.4% relative to 18.5% posted during Q4FY11 due to huge rise in power & fuel cost and other expenditure. Power & fuel cost and other expenditure increased by 3.5% and 65.5% Y-o-Y to Rs crore and Rs crore respectively in Q4FY12. Net profit margin declined 26 bps in Q4FY12 Higher cost of imported inputs on the back of depreciation of the Indian currency, higher interest rates and inflationary pressure negatively impacted the company s net profit margin both during the year as well as during the quarter. Quarterly Financial Summary - Consolidated Particulars (Rs in Y-o-Y Q-o-Q Q4FY12 Q4FY11 Q3FY12 Cr) Gr % Gr % FY12 Total Income % 16.7% EBITDA % -8.4% EBITDA Margin % 7.4% 18.5% 9.4% 12.9% EBIT % -5.% EBIT Margin % 1.7% 12.2% 2.1% 6.3% Net Profit % -42.% 3.6 Net Profit Margin % 1.6% 4.2% 3.1%.1% EPS Valuations Usha Martin is trading at a P/E multiple of 222.1x FY12 EPS of Rs..1 and 5.1x EV/EBITDA multiple based on FY12 EBITDA of Rs. 434 crore.

2 Rs in Crore Usha Martin Ltd. Steel remained the company s major revenue contributor, accounting for 39% of total sales in Q4FY12. Product wise sales break up in Q4FY12 Wire Ropes 35% Bright Bars 3% Cable & Others 3% Construction Steel 4% Wire & Strand 16% Steel 39% Source: Company Presentation, ICRA Online Research Product-wise Sales Analysis Steel sales grew 23% sequentially during the quarter. On the contrary, the company witnessed negative and lowest Q-o-Q growth of 6.6% in the sales of construction steel. This product has contributed around 58% to the company s revenue during Q4FY12. Cables sales grew by 17% on quarterly basis, while it declined by 17% on Y-o-Y basis. Wire and Wire Ropes segment contributed 4% of the company s revenue during the quarter. Wire & strand, coupled with wire ropes segment, together reported growth of 3.3% and 43.7% respectively on Q-o-Q and Y-o-Y basis. Slowdown in key market segments and higher competition in steel business kept margin under pressure. Segment Revenue Consolidated (Gross Revenue without adjusting inter segment) Steel Wire and Wire Ropes Segmental revenue growth in Steel and Wire & Wire Rope saw decent rise in their growth figure Q-o-Q. However, Y-o-Y, baring Wire & Wire Ropes (-1.%), steel revenue has grown considerably by 13.5%. -2-

3 Usha Martin Ltd. Revenue break up Geography wise The company generated 71% of the total revenue from the domestic market, while the rest came from business abroad. Europe 1% Middle East 4% Asia Pacific 11% America 3% Africa 1% India 71% Source: Company Presentation, ICRA Online Research -3-

4 Rs in Crore Net Profit Margin % Rs in Crore EBITDA Margin % Rs in Crore Usha Martin Ltd. Revenue up by 9.9% Y-o-Y in Q4FY12 Higher sales realization and surge in sales volume helped the company increase its revenue 9.9% Y- o-y during the quarter Revenue EBITDA margins plunged severely to 1112 bps Y-o-Y in Q4FY12 Despite sequential growth, EBITDA margin declined drastically on the back of elevated power and fuel cost and other expenditure in Q4FY % 18.9% 17.5% % 7.4% 24% 18% 12% % % EBITDA EBITDA Margin High interest cost adversely impacted the net profit margin during the quarter. PAT declined to Rs 14.9 crore in Q4FY12 from Rs 36.2 crore in Q4FY % 3.3% 3.1% % % 2% -2% % Net profit Net Profit Margin -6% -1% -4-

5 Usha Martin Ltd. Summary Financials Profit & Loss Statement Consolidated Particulars (Rs Crore) Q4FY12 Q4FY11 Q3FY12 Y-o-Y Gr% Q-o-Q Gr% FY11 FY12 Net Sales % 16.8% Other Op. Revenue % -1.% 16.. Total Income % 16.7% Cost of Goods Sold (41.5) (355.7) (341.4) 12.9% 17.6% (1182.4) (1346.8) Gross Profit % 16.% Employee Costs (58.2) (54.3) (62.4) 7.2% -6.8% (22.1) (238.4) Power and Fuel (116.9) (89.6) (19.9) 3.5% 6.4% (343.6) (422.3) Consumption of Stores & Spare Parts (49.9) (52.8) (58.) -5.6% -14.1% (22.9) (212.2) Other Expenditure (257.2) (155.4) (169.2) 65.5% 52.% (53.9) (77.) EBITDA % -8.4% Depreciation (54.3) (54.9) (59.9) -1.1% -9.4% (21.) (223.) EBIT % -5.% Interest (75.4) (51.5) (69.1) 46.4% 9.1% (182.3) (263.7) Other Income % % Exceptional Items NA -67.%.. PBT % -4.2% Income Tax (7.9) (19.7) (12.8) -59.9% -38.2% (64.) (4.8) Profit after Tax % -41.1% Extra Ordinary Items... NA NA.. Others (.7) (.7) (.7) -9.7% -8.5% (3.) (3.) Net Profit % -42.% Rep. Basic EPS Rep. Diluted EPS Equity Capital Face value Ratios Particulars (Rs Crore) Q4FY12 Q4FY11 Q3FY12 Y-o-Y Q-o-Q FY11 FY12 Margins Gross Margin (%) 57.9% 59.1% 58.3% (112) (34) 61.4% 59.9% EBITDA Margin (%) 7.4% 18.5% 9.4% (1112) (22) 19.% 12.9% EBIT Margin (%) 1.7% 12.2% 2.1% (148) (39) 12.5% 6.3% Net Profit Margin (%) 1.6% 4.2% 3.1% (26) (158) 4.5%.1% Valuation EPS BVPS P/BV(x) P/E (x) EV/ EBITDA (x) EV/ Sales (x)

6 Usha Martin Ltd. Contact Details: Rahul Jain ICRA Online Limited, Phone: , Disclaimer All information contained in this document has been obtained by ICRA Online Limited from sources believed by it to be accurate and reliable. Although reasonable care has been taken to ensure that the information herein is true, such information is provided 'as is' without any warranty of any kind, and ICRA Online Limited in particular, makes no representation or warranty, express or implied, as to the accuracy, timeliness or completeness of any such information. All information contained herein must be construed solely as statements of opinion, and ICRA Online Limited shall not be liable for any losses incurred by users from any use of this document or its contents in any manner. Opinions expressed in this document are not the opinions of our holding company and of the subsidiary companies and should not be construed as any indication of credit rating or grading of ICRA for any instruments that have been issued or are to be issued by any entity. Published on behalf of The Stock Exchange Investors' Protection Fund Bombay Stock Exchange Ltd. P J Towers, Dalal Street, Mumbai. Tel: /