We have assigned a neutral rating to Sesa Goa with a target price of R210. We value Sesa Goa’s core business on a sum-of-the-parts (SoTP) basis with iron ore operations on a DCF-to-firm basis (5% debt-to-equity, 15% weighted average cost of capital).
We value Sesa Goa as a merged entity (Sesa Sterlite) and believe the merger with Sterlite Industries has a high likelihood of being successful. Recently, the Competition Commission of India approved the merger and the next leg of approvals rest with the Foreign Investment Promotion Board.