Despite Decent quarterly Numbers, Uttam Galva Shares Plunge 9%

Uttam Galva Steel came out with its Q3FY13 numbers. The company reported a decent set of December 2012 quarter numbers, despite the stock plunging heavily, closing down by 9% to Rs 90 per share. The following table gives us the overall performance of the company for the quarter:

For Q3FY12, the net sales of the company increased by 32% to Rs 1460 crore, while the Net Profit of the same grew by 8% to Rs 12 crore on a YoY basis. The Operating Profit of the company also grew at a handsome rate of 30% to Rs 154 crore on a YoY basis.

It was due to a higher depreciation and Tax outgo that the company reported lower growth in its bottomline. Depreciation for the December quarter increased by 44% to Rs 46 crore, while the company’s net tax outgo stood at Rs 13.26 crore against Rs 5.3 crore in the similar period last year.

The steel company witnessed a pressure on its Margins which contracted in the quarter. The Operating Margin decreased by 21 basis points to 10.54%, while the Net Profit margin also declined by 18 basis points to 0.82%, which is at a very low level.

On the valuation front, the company is currently available at a PE of 25x on Estimated EPS of Rs 3.63 for FY13, which we believe is on the higher side. The company posted a decent performance for the December 2012 quarter. However, we believe that the stock is currently available on a higher valuation and hence, there could be some correction seen in the counter going ahead. We would therefore advise our readers to stay away from the counter.