Sesa GoaSesa goa was supposed to be an outperformer by many analysts. However past 3 months have seen over 35% erosion of the stock price of Sesa Goa. Sesa Goa's main business consists of mining and exporting iron ore. However apart from iron ore the company is also into production of metallurgical coke.
First main reason for Sesa Goa fall -Falling iron ore pricesIron ore prices have fallen significantly from their peak prices in the last year. This is one of the main reason for the price drop in Sesa Goa. Read more about How Iron ore prices work.
Second main reason for Sesa Goa Fall - China regulationsChina is one of the largest importers of iron ore. Recently, the Chinese Government has banned import of low quality iron ore (one which contains less than 60% of iron). This has direct adverse consequences for Sesa Goa.
Will Sesa Goa stock see some action ?There can be various speculations and theories regarding this. My personal opinion is that the stock will see some action ( by which I mean about 20%-25% rise once iron ore prices rise. However the following comment from livemint is worth noting about valuations on Sesa goa.
At first, Sesa’s projection of a 20-25% increase in deliveries in fiscal 2011 may seem weak compared with the previous year’s 36% growth. But this higher growth has been mainly achieved due to the contribution of iron ore from its Dempo acquisition. Adjusted for that, sales growth was 12% and 11% in the full year and March quarter, respectively. Dempo’s figures reflect in Sesa’s results from June 2009. The base effect will fade after the June quarter.