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RESULT UPDATE
JSW Steel — Along expected lines
JSW Steel — Along expected lines
Operational numbers broadly in line with expectations
Consolidated topline was Rs59,722mn, a growth of 26% YoY and 23% QoQ, and marginally below our expectation by 4%. EBITDA was Rs10,227mn, again 4% below our estimates. Reported net profit came in at Rs3,733mn, compared to our forecast of Rs3,030mn. The outperformance was on account of forex gains (Rs1,570mn in the quarter).
Domestic volumes rebound while US operations continue to be sluggish
Crude steel production at 1.57mt was stagnant on a sequential basis but sales volume (1.58mt) saw 33% QoQ growth, reflecting the reduction in inventory. Net sales per tonne sold declined QoQ to Rs36,089 (8% decline) from Rs39,017. Costs, excluding depreciation, rose marginally to Rs30,220/t from Rs29,794/t - while raw material costs rose as expected, this was offset by cost improvements across other categories. EBITDA (incl. other operating income) was Rs6,268/t, compared with Rs9,503/t in 1QFY11. In the US, while capacity utilization was steady, sales volume, particularly that of pipes, fell QoQ and margins came under pressure.
West Bengal project — the next leg of growth
While the 3.2mtpa expansion scheduled for March 2011 is on track, the company outlined the 4.5mtpa West Bengal steel project, which should fuel growth in FY15E and beyond. Land area of 1,400 acres has already been acquired, and since the project will have captive coking coal mines, the expansion will be a profitable one.
Maintain BUY recommendation, TP revised to Rs1,500
The management has good project execution track record, and we expect volume growth over next few years to be robust, led by the expansions. We maintain our BUY recommendation on the stock, while rolling forward our TP to Rs1,500 for September 2011 (earlier Rs1,400 for March 2011).
Consolidated topline was Rs59,722mn, a growth of 26% YoY and 23% QoQ, and marginally below our expectation by 4%. EBITDA was Rs10,227mn, again 4% below our estimates. Reported net profit came in at Rs3,733mn, compared to our forecast of Rs3,030mn. The outperformance was on account of forex gains (Rs1,570mn in the quarter).
Domestic volumes rebound while US operations continue to be sluggish
Crude steel production at 1.57mt was stagnant on a sequential basis but sales volume (1.58mt) saw 33% QoQ growth, reflecting the reduction in inventory. Net sales per tonne sold declined QoQ to Rs36,089 (8% decline) from Rs39,017. Costs, excluding depreciation, rose marginally to Rs30,220/t from Rs29,794/t - while raw material costs rose as expected, this was offset by cost improvements across other categories. EBITDA (incl. other operating income) was Rs6,268/t, compared with Rs9,503/t in 1QFY11. In the US, while capacity utilization was steady, sales volume, particularly that of pipes, fell QoQ and margins came under pressure.
West Bengal project — the next leg of growth
While the 3.2mtpa expansion scheduled for March 2011 is on track, the company outlined the 4.5mtpa West Bengal steel project, which should fuel growth in FY15E and beyond. Land area of 1,400 acres has already been acquired, and since the project will have captive coking coal mines, the expansion will be a profitable one.
Maintain BUY recommendation, TP revised to Rs1,500
The management has good project execution track record, and we expect volume growth over next few years to be robust, led by the expansions. We maintain our BUY recommendation on the stock, while rolling forward our TP to Rs1,500 for September 2011 (earlier Rs1,400 for March 2011).
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