Sell Sesa Goa, target of Rs 66: Reliance Money

Reliance Money has recommended a sell rating on Sesa Goa with a target price of Rs 66 in its December 26, 2008 research report. "We expect Sesa Goa to register a top line of Rs 46.6 billion (up 29.4% YoY), an EBIDTA of Rs 22.8 (Up by just 4.8% YoY) and adjusted EPS of Rs. 22.9 for FY09E and Rs 42.5 billion (down by 8.8% YoY), an EBIDTA of Rs 18.4 billion (YoY cut of 19%) and an adjusted of EPS of Rs 19 (17% reduction (YoY). We expect the EBIDTA margins to correct by 1150 bps (YoY) in FY09E to 48.9% and down by 550 bps (YoY) in FY10E to 43.4%."

"The stock is currently trading at a P/E of 4.5x and EV/ EBIDTA of 1.5x for FY10E. Although, the company is quite cash rich, the growth prospects in the near future look capped considering a weaker Chinese market ahead. We, hence, expect the stock to under perform and recommend a SELL with a price target of Rs 66 at which the stock would quote at 0.75x EV/EBIDTA on FY10E. The target price is at 22% below the CMP of Rs 84," says Reliance Money's research report.