1. 4QFY2010 Result Update I Mining
April 20, 2010
Sesa Goa NEUTRAL
CMP Rs456
Performance Highlights Target Price -
Sesa Goa’s 4QFY2010 consolidated Net sales grew by 67.6% yoy and 28.0% Investment Period -
qoq to Rs2,419cr, in line with our estimate of Rs 2,343cr. However net profit
came in at Rs1,213cr, up by 121.5% yoy and 46.6% qoq, higher than our Stock Info
estimates of Rs1,005cr. We believe that the near-term strength in the iron ore
Sector Mining
market has already been priced in; hence, we maintain a Neutral rating on
the stock. Market Cap (Rs cr) 37,916
Quarterly earnings’ momentum maintained: Sesa’s 4QFY2010 net sales Beta 1.1
increased by 67.6% yoy and 28.0% qoq to Rs2,419cr, in-line with our
52 WK High / Low 494 / 107
estimates of Rs2,343cr. Sesa sold 7.4mn tonnes during the quarter (including
1.8 mn tonnes from Dempo). Although realisations increased by 30.3% yoy to Avg. Daily Volume 2,356,447
US $67/tonne (US $51/tonne), EBITDA margin (adjusted for forex loss of
Face Value (Rs) 1
Rs118cr in 4QFY2009) expanded by 176bp to 62.1% (60.4%), due to higher
staff costs (up 78.7% yoy to Rs44.7cr) and Rs80-90cr negative impact on BSE Sensex 17,461
account of increase in royalty rates. In addition, increase in export duty
impacted the operational performance negatively by Rs134cr. Consequently, Nifty 5,230
the adjusted EBITDA grew by 72.5% yoy and 45.1% qoq to Rs1,503cr. Other Reuters Code SESA.BO
income increased by 127.6% yoy to Rs129cr, as it included mark-to-market
gains of Rs55cr on FCCBs. Net income increased by 121.5% yoy and 46.6% Bloomberg Code SESA@IN
qoq to Rs1,213cr, higher than our estimate of Rs1,005cr, due to a strong Shareholding Pattern (%)
operational performance and higher other income.
Promoters 57.0
Annual Volume guidance missed: Sesa Goa missed its annual volume growth
guidance of 20-25%. For FY2010, the sales volume (ex-Dempo) stood at MF/Banks/Indian FIs 4.6
16.9mn tonnes, higher by 12.1% only, while including Dempo sales of 3.6mn FII/NRIs/OCBs 26.8
tonnes, it grew by 35.8%. According to the management, the loss of sales was
mainly due to the delayed monsoon and cyclonic storms during October- Indian Public 11.6
November, 2009, the on-going mining issues in Orissa and Karnataka, and
Abs. (%) 3m 1yr 3yr
difficulty in getting mining permits.
Sensex (0.1) 59.0 25.6
Outlook and Valuation: At the CMP of Rs456, the stock is trading at 5.6x
FY2011E and 4.4x FY2012E EV/EBITDA, and 3.3x FY2011E and 2.5x
Sesa Goa 12.9 292.3 420.7
FY2012E P/BV. In our view, the near-term strength in the iron ore market has
already been priced in, and given the uncertainty over deployment of surplus
cash, delays in mining regularities and the widening discount between 63.5%
Fe and lower-grade ore realisations, we maintain a Neutral on the stock.
Key Financials (Consolidated)
Y/E March (Rs cr) FY2009 FY2010 FY2011E FY2012E
Net Sales 4,959 5,858 9,582 10,662
% chg 29.7 18.1 63.6 11.3
Net Profit 1,988 2,629 4,115 4,522
% chg 28.4 32.2 56.5 9.9
OPM (%) 51.3 53.7 54.5 54.7
EPS (Rs) 25.3 30.4 47.5 52.2
P/E (x) 18.1 15.0 9.6 8.7 Paresh Jain
P/BV (x) 7.6 5.0 3.3 2.5 Tel: 022 – 4040 3800 Ext: 348
RoE (%) 51.9 42.8 43.8 34.2 E-mail: pareshn.jain@angeltrade.com
RoCE (%) 63.9 41.4 43.2 36.4
Pooja Jain
EV/Sales (x) 6.4 5.6 3.1 2.4
Tel: 022 – 4040 3800 Ext: 311
EV/EBITDA (x) 12.5 10.5 5.6 4.4 E-mail: pooja.j@angeltrade.com
Source: Company, Angel Research
1
Please refer to important disclosures at the end of this report Sebi Registration No: INB 010996539

2. Sesa Goa I 4QFY2010 Result Update
Exhibit 1: 4QFY2010 Performance (Consolidated)
(All values in Rs cr) 4QFY10 4QFY09 YoY% FY10 FY09 YoY%
Net Sales 2,419 1,444 67.6 5,858 4,959 18.1
Raw Material 186 208 (10.5) 534 494 8.1
% of Net sales 7.7 14.4 9.1 10.1
Consumption of Stores 69 55 25.8 244 178 36.7
% of Net sales 2.8 3.8 4.2 3.6
Staff Cost 45 25 78.7 169 77 119.8
% of Net sales 1.8 1.7 2.9 2.0
Export Duty 121 (13) - 148 216 (31.6)
% of Net sales 5.0 (0.9) 2.5 4.3
Other Expenditure 495 415 19.2 1,639 1,446 13.4
% of Net sales 20.5 28.8 28.0 29.2
Total Expenditure 916 690 32.7 2,713 2,417 12.3
% of Net sales 37.9 47.8 46.3 48.8
EBITDA 1,503 754 99.5 3,145 2,542 23.7
% of Net sales 62.1 52.2 53.7 51.3
Interest 23 1 2,960.8 52 4 1,111.2
Depreciation 17 15 10.7 75 52 44.2
Other Income 129 57 127.6 426 224 90.1
Exceptional Items - - - -
Profit before Tax 1,593 794 100.5 3,445 2,710 27.1
% of Net sales 65.8 55.0 58.8 54.7
Tax 378 246 53.5 806 715 12.6
% of PBT 23.7 31.0 23.4 26.4
Profit After tax 1,213 548 121.5 2,629 1,988 32.2
% of Net sales 50.1 37.9 44.9 40.1
EPS (Rs) 14.0 7.0 101.4 30.4 25.3 20.3
Source: Company, Angel Research
Other key Concall takeaways
• Total reserves and resources as on March 31, 2010 stood at 353mn tonnes
(including 70mn tonnes from the Dempo acquisition), as against 240mn tonnes
in FY2009. Thus, the net addition for FY2010 was 43mn tonnes, of which a
significant quantity came from Dempo mines.
• The management indicated that there is no confirmed news about China’s ban
on low-grade ore imports by traders. Sesa sells less than 25% of its iron ore
quantity below 60% Fe content through traders.
• The management indicated that the spot iron ore prices for 58% Fe content is
US $126/tonne.
• In 4QFY10, Goa sales accounted for nearly 83.8% of the total volumes, the
balance was sold from Karnataka and Orissa. The spot:contract mix for FY2010
was 80:20.
• The tax rate was lower as some units in Goa availed tax benefits. The
management indicated that the Export Oriented Unit (EOU) status is valid up till
FY2011E and guided for a tax rate of 23-24% for FY2011E.
• The long-term agreement for the Orissa mines is yet to be finalised.
• Cash and Cash equivalents stood at Rs6,952cr, which excludes the loan of
Rs1,000cr given to Vedanta Aluminium.
April 20, 2010 2

3. Sesa Goa I 4QFY2010 Result Update
Outlook and Valuation
At the CMP of Rs456, the stock is trading at 5.6x FY2011E and 4.4x FY2012E
EV/EBITDA, and 3.3x FY2011E and 2.5x FY2012E P/BV. 4QFY2010 saw a structural
shift in the benchmark contract system, with global miners reportedly signing
contracts on a quarterly basis. We believe that the new pricing mechanism is likely to
help miners in fetching better realisations. However, in our view, the near-term
strength in the iron ore market has already been priced in, and given the uncertainty
over deployment of surplus cash, delays in mining regularities and the widening
discount between 63.5% Fe and lower-grade ore realisations, we maintain a Neutral
on the stock.
Exhibit 2: 1-year forward EV/EBITDA band
(Rs mn)
800 ,000
700,000 13x
600,000
10x
500,000
400,000 7x
300 ,000
200,000 4x
100,000
1x
0
Apr-02 Apr-03 Apr-04 Apr-05 Apr-06 Apr-07 Apr-08 Apr-09 Apr-10
Source: Bloomberg, Angel Research
Exhibit 3: 1-year forward P/E band
(Rs)
800
15x
700
600
11x
500
400
7x
300
200
3x
100
0
Apr-02 Apr-03 Apr-04 Apr-05 Apr-06 Apr-07 Apr-08 Apr-09 Apr-10
Source: Bloomberg, Angel Research
April 20, 2010 3

4. Sesa Goa I 4QFY2010 Result Update
Exhibit 4: 1-year forward P/BV band
(Rs)
600
4x
500
400 3x
300 2x
200
1x
100
0
Apr-02 Apr-03 Apr-04 Apr-05 Apr-06 Apr-07 Apr-08 Apr-09 Apr-10
Source: Bloomberg, Angel Research
Exhibit 5: Spot iron ore prices
Source: Bloomberg, Angel Research
Exhibit 6: Monthly iron ore production in China
Source: Bloomberg, Angel Research
April 20, 2010 4

5. Sesa Goa I 4QFY2010 Result Update
Exhibit 7: Monthly iron ore imports in China
Source: Bloomberg, Angel Research
April 20, 2010 5

6. Sesa Goa I 4QFY2010 Result Update
Profit & Loss Statement (Consolidated) Rs crore
Y/E March FY2007 FY2008 FY2009 FY2010 FY2011E FY2012E
Gross sales 2,236 3,845 4,991 5,847 9,774 10,876
Less: Excise duty 60 79 73 44 192 213
Net Sales 2,176 3,766 4,918 5,803 9,582 10,662
Other operating income 42 57 41 55 0 0
Total operating income 2,218 3,823 4,959 5,858 9,582 10,662
% chg 20.2 72.4 29.7 18.1 63.6 11.3
Total Expenditure 1,255 1,519 2,417 2,713 4,359 4,829
Net Raw Materials 466 477 494 534 724 790
Other Mfg costs 169 294 394 391 670 748
Personnel 64 68 77 169 129 142
Other 556 680 1,452 1,619 2,836 3,149
EBITDA 963 2,303 2,542 3,145 5,223 5,834
% chg 11.6 139.2 10.4 23.7 66.1 11.7
(% of Net Sales) 43.4 60.3 51.3 53.7 54.5 54.7
Depreciation& Amortisation 39 50 52 75 98 117
EBIT 924 2,253 2,490 3,070 5,125 5,717
% chg 10.9 144.0 10.5 23.3 66.9 11.5
(% of Net Sales) 41.6 58.9 50.2 52.4 53.5 53.6
Interest & other Charges 3 3 4 52 118 118
Other Income 45 74 224 426 410 579
(% of PBT) 4.7 3.2 8.3 12.4 7.6 9.4
Share in profit of Associates - - - - - -
Recurring PBT 966 2,325 2,710 3,445 5,418 6,178
% chg 12.5 140.7 16.6 27.1 57.3 14.0
Extraordinary Inc/(Expense) - - - - - -
PBT (reported) 966 2,325 2,710 3,445 5,418 6,178
Tax 315 776 715 806 1,300 1,668
(% of PBT) 32.6 33.4 26.4 23.4 24.0 27.0
PAT (reported) 651 1,549 1,995 2,639 4,117 4,510
Add: Share of associates - - - - - -
Less: Minority interest (MI) - - (7) (10) (2) 12
Extraordinary Exp./(Inc.) - - - - - -
PAT after MI (reported) 651 1,549 1,988 2,629 4,115 4,522
ADJ. PAT 651 1,549 1,988 2,629 4,115 4,522
% chg 13.2 137.9 28.4 32.2 56.5 9.9
(% of Net Sales) 29.4 40.5 40.1 44.9 42.9 42.4
Basic EPS (Rs) 8.3 19.7 25.3 31.6 49.5 54.4
Fully Diluted EPS (Rs) 8.3 19.7 25.3 30.4 47.5 52.2
% chg 13.2 137.9 28.4 20.3 56.5 9.9
April 20, 2010 6

7. Sesa Goa I 4QFY2010 Result Update
Balance Sheet (Consolidated) Rs crore
Y/E March FY2007 FY2008 FY2009 FY2010E FY2011E FY2012E
SOURCES OF FUNDS
Equity Share Capital 39 39 79 82 82 82
Reserves& Surplus 1,570 2,904 4,637 7,487 11,127 15,175
Shareholders Funds 1,609 2,943 4,716 7,569 11,209 15,257
Share Warrants - - - - - -
Minority Interest 19 27 33 43 46 33
Total Loans - - 2 2,402 2,402 2,402
Deferred Tax Liability 65 66 66 71 71 71
Total Liabilities 1,693 3,036 4,817 10,085 13,728 17,763
APPLICATION OF FUNDS
Gross Block 722 770 886 2,769 2,999 3,229
Less: Acc. Depreciation 262 294 342 417 515 631
Net Block 460 476 544 2,353 2,485 2,598
Capital Work-in-Progress 20 21 49 143 375 469
Goodwill - - - - - -
Investments 845 2,051 3,125 3,125 3,125 3,125
Current Assets 630 864 1,683 5,144 8,689 12,552
Cash 21 21 18 4,276 7,351 11,072
Loans & Advances 39 59 1,103 94 153 171
Other 569 784 562 774 1,184 1,309
Current liabilities 262 376 584 680 946 982
Net Current Assets 368 488 1,099 4,465 7,742 11,570
Mis. Exp. not written off - - - - - -
Total Assets 1,693 3,036 4,817 10,085 13,728 17,763
Cash Flow Statement (Consolidated) Rs crore
Y/E March FY2007 FY2008 FY2009 FY2010E FY2011E FY2012E
Profit before tax 966 2,325 2,710 3,445 5,418 6,178
Depreciation 39 50 52 75 98 117
Change in Working Capital (24) (170) 314 (222) (306) (89)
Less: Other income (43) (71) (221) - - -
Direct taxes paid 324 747 721 801 1,300 1,668
Cash Flow from Operations 614 1,387 2,134 2,496 3,909 4,538
Inc./ (Dec.) in Fixed Assets 112 67 147 1,977 463 324
Inc./ (Dec.) in Investments 371 1,205 965 - - -
Inc./ (Dec.) in loans and advances - - - - 60 17
Other income 42 69 113 - - -
Cash Flow from Investing 441 1,203 999 1,977 522 341
Issue of Equity - - - 537 - -
Inc./(Dec.) in loans (10) - - 2,400 - -
Dividend Paid (Incl. Tax) 180 184 138 207 313 475
Others - - 1,001 (1,009) - -
Cash Flow from Financing (190) (184) (1,139) 3,739 (313) (475)
Inc./(Dec.) in Cash (16) (0) (3) 4,259 3,074 3,722
Opening Cash balances 37 21 21 18 4,276 7,351
Closing Cash balances 21 21 18 4,276 7,351 11,072
April 20, 2010 7

8. Sesa Goa I 4QFY2010 Result Update
Key Ratios
Y/E March FY2007 FY2008 FY2009 FY2010E FY2011E FY2012E
Valuation Ratio (x)
P/E (on FDEPS) 55.2 23.2 18.1 15.0 9.6 8.7
P/CEPS 8.8 20.3 25.9 30.0 47.4 52.1
P/BV 22.3 12.2 7.6 5.0 3.3 2.5
Dividend yield (%) 0.4 0.5 0.5 0.7 1.1 1.1
EV/Sales 15.8 8.9 6.4 5.6 3.1 2.4
EV/EBITDA 36.4 14.7 12.5 10.5 5.6 4.4
EV / Total Assets 20.7 11.1 6.6 3.3 2.1 1.4
Per Share Data (Rs)
EPS (Basic) 8.3 19.7 25.3 31.6 49.5 54.4
EPS (fully diluted) 8.3 19.7 25.3 30.4 47.5 52.2
Cash EPS 8.8 20.3 25.9 30.0 47.4 52.1
DPS 2.0 2.3 2.3 3.3 5.0 5.0
Book Value 20.4 37.4 59.9 91.1 136.6 185.9
Dupont Analysis
EBIT margin 41.6 58.9 50.2 52.4 53.5 53.6
Tax retention ratio (%) 67.4 66.6 73.6 76.6 76.0 73.0
Asset turnover (x) 2.7 4.1 7.9 2.2 3.0 3.0
ROIC (Post-tax) 77.1 160.1 290.2 89.1 121.5 118.2
Cost of Debt (Post Tax) 45.9 - 335.3 3.9 4.9 4.9
Leverage (x) (0.5) (0.7) (0.9) (0.7) (0.7) (0.8)
Operating ROE 60.3 47.4 329.9 32.8 37.5 30.6
Returns (%)
ROCE (Pre-tax) 63.9 96.2 63.9 41.4 43.2 36.4
Angel ROIC (Pre-tax) 122.0 258.2 317.3 187.7 175.3 169.7
ROE 47.2 68.0 51.9 42.8 43.8 34.2
Turnover ratios (x)
Asset Turnover (Gross Block) 3.4 5.1 6.0 3.2 3.3 3.4
Inventory / Sales (days) 247.2 233.6 212.7 200.0 200.0 200.0
Receivables (days) 42.6 35.5 28.4 30.0 30.0 30.0
Payables (days) 104.5 175.9 219.8 200.0 200.0 200.0
WC cycle (ex-cash) (days) 74.6 52.7 32.9 23.3 23.2 27.5
Solvency ratios (x)
Net debt to equity (0.5) (0.7) (0.9) (0.7) (0.7) (0.8)
Net debt to EBITDA (9.0) (9.0) (16.3) (15.9) (15.5) (20.2)
Interest Coverage 311.2 819.4 583.2 59.4 43.3 48.3
April 20, 2010 8

9. Sesa Goa I 4QFY2010 Result Update
Research Team Tel: 022-4040 3800 E-mail: research@angeltrade.com Website: www.angeltrade.com
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Disclosure of Interest Statement Sesa Goa
1. Analyst ownership of the stock No
2. Angel and its Group companies ownership of the stock Yes
3. Angel and its Group companies’ Directors ownership of the stock No
4. Broking relationship with company covered No
Note: We have not considered any Exposure below Rs 1 lakh for Angel and its Group companies.
Address: Acme Plaza, ‘A’ Wing, 3rd Floor, M.V. Road, Opp. Sangam Cinema, Andheri (E), Mumbai - 400 059.
Tel : (022) 3952 4568 / 4040 3800
Angel Broking Ltd: BSE Sebi Regn No : INB 010996539 / CDSL Regn No: IN - DP - CDSL - 234 - 2004 / PMS Regn Code: PM/INP000001546 Angel Securities Ltd:BSE: INB010994639/INF010994639 NSE:
INB230994635/INF230994635 Membership numbers: BSE 028/NSE:09946
Angel Capital & Debt Market Ltd: INB 231279838 / NSE FNO: INF 231279838 / NSE Member code -12798 Angel Commodities Broking (P) Ltd: MCX Member ID: 12685 / FMC Regn No: MCX / TCM /
CORP / 0037 NCDEX : Member ID 00220 / FMC Regn No: NCDEX / TCM / CORP / 0302
April 20, 2010 9