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Analyst Research Report Snapshot


Sesa Sterlite (SSLT) - Qtr. Update - Dated - May 29, 2014




Axis Capital Limited


30 May 2014





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We met Tom Albanese, CEO of Sesa Sterlite and Vedanta Resources. The new CEO (took charge around 2 months ago) has rich global exploration experience which will help the company tap the vast potential of Indian mining space. Key takeaways:  Improve performance in underutilized assets: Aluminium – operationalize smelter capacity by using its own electricity (2,400 MW). Management met Odisha’s CM and was hopeful of early resolution to bauxite mining issues. Iron Ore – Restart operations in Goa  Enhance performance of high RoCE assets: Zinc (India) – Expedite transition to underground mining, and expansion to 1.2 mn tpa of mined zin-lead metal. Oil & Gas – Maximize exploration and optimize ramp up at Rajasthan block  Consolidate and simplify group structure: Realize full merger benefits of Sesa-Sterlite and pursue minority buyout of HZL & Balco We retain our EPS estimates for FY15 and FY16 at Rs 21 and Rs 28 respectively. Maintain HOLD with SOTP-based TP of Rs 267, which implies a downside of 3% from CMP of Rs 275 Other highlights  Aluminium: Balco – First metal was tapped in Q4 and 1st phase of 84 pots are ramping up. Additional pots to be started post commissioning of 1,200 MW power plant. The company expects to start mining of the Balco coal block (211 mn tonnes reserve) this year. Sesa-sterlite expects to start 50 pots of 1st line of 313 Kt (out of total 1.25 mn tonnes where it has already spent 86% of capex. Total expanded capacity stands at 2.3 mtpa  Iron ore: Capacity utilization was 10% (current capacity at 16 mtpa) due to mining ban in Goa. The company is working with the government to restart the mining in Goa in H2FY15  Zinc – India: Underground mine development hit 1,000 meters in April 2014, as opposed ~500 meters a year ago. Capacity to rise to 1.2 mtpa in the long term (1 mtpa currently). FY15 production is expected to be a tad higher than FY14  Oil & Gas – Rajasthan 3-Year plan: Capex at USD 2.4 bn, which would drive 7-10% production CAGR Regards, Jagdishwar Toppo (Executive Director – Materials) jagdishwar.toppo@axiscap.in; 91 22 4325 1103 Nitesh Jain (Sr VP – Materials) nitesh.jain@axiscap.in; 91 22 4325 1145 Sujan Sanisetty (VP – Materials) sujan.sanisetty@axiscap.in; 91 22 4325 1122

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