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Jindal Steel and Power Limited -3Q: Power profits disappoint
„3Q results miss as power profits disappoint, Underperform
Consol. PAT grew 6%QoQ to Rs9.5bn vs. Rs10.5bn est led by lower power profits
owing to fall in merchant tariffs. Standalone PAT was 8% below our est. led by
lower captive power profits. We cut our FY11e EPS by 5% to factor lower JPL
profits & delays in ramp up of captive power units. JSPL’s steel unit is better
placed due raw material integration but core power business (56% of PAT) is
facing headwinds from lower merchant prices. Valuations are full at 9x FY12e
EBITDA, 4.1x FY12eBV & premium to SOTP NPV Rs640. Underperform
Power tariffs decline QoQ ; Mgmt guides to softer outlook
JPL PAT was Rs4.9bn, up 6%QoQ, 6% below our est. Avg. PLF was impressive
at 101%, but avg. power tariff was Rs3.96/kwh, down10%QoQ (11% below our
est.) due to lower merchant tariff. Mgmt expects merchant tariff of Rs3.75-4.5/kwh
(Rs4.3/kwh in 3Q) over next few qtrs. (prev. guidance of ~Rs4.5/kwh). We
forecast JPL EBITDA to decline 14%YoY in FY12e led by lower merchant tariff.
Steel EBIT in line, captive power disappoints on lower tariff
Standalone PAT grew 5%QoQ to Rs5bn. Sales volumes grew 15%QoQ to 0.5mn
tons. Power EBIT declined 6%QoQ despite 42%QoQ growth in unit sales due to
lower tariff. JSPL has guided to steel volumes of 2mt in FY11e and 2.5mn tons in
FY12e. We forecast steel EBITDA of Rs36.4bn in FY11 and Rs34.3bn in FY12.
Key takeaways from management call
The 2x135MW captive power units are still operating at 35% PLF, but JSPL
expects PLF to ramp up to 75% in 4Q. Orissa captive project time lines appear to
have been pushed back. JSPL now expects to start balance 8x135MW captive
power units during FY12. The 2400MW power project has been cleared by the
Advisory Committee, but work is on hold as final approval is awaited. 1.5mtpa HBI
unit at Oman has been commissioned, which could add ~5% to our FY12EPS.
India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details �� ��
Jindal Steel and Power Limited -3Q: Power profits disappoint
„3Q results miss as power profits disappoint, Underperform
Consol. PAT grew 6%QoQ to Rs9.5bn vs. Rs10.5bn est led by lower power profits
owing to fall in merchant tariffs. Standalone PAT was 8% below our est. led by
lower captive power profits. We cut our FY11e EPS by 5% to factor lower JPL
profits & delays in ramp up of captive power units. JSPL’s steel unit is better
placed due raw material integration but core power business (56% of PAT) is
facing headwinds from lower merchant prices. Valuations are full at 9x FY12e
EBITDA, 4.1x FY12eBV & premium to SOTP NPV Rs640. Underperform
Power tariffs decline QoQ ; Mgmt guides to softer outlook
JPL PAT was Rs4.9bn, up 6%QoQ, 6% below our est. Avg. PLF was impressive
at 101%, but avg. power tariff was Rs3.96/kwh, down10%QoQ (11% below our
est.) due to lower merchant tariff. Mgmt expects merchant tariff of Rs3.75-4.5/kwh
(Rs4.3/kwh in 3Q) over next few qtrs. (prev. guidance of ~Rs4.5/kwh). We
forecast JPL EBITDA to decline 14%YoY in FY12e led by lower merchant tariff.
Steel EBIT in line, captive power disappoints on lower tariff
Standalone PAT grew 5%QoQ to Rs5bn. Sales volumes grew 15%QoQ to 0.5mn
tons. Power EBIT declined 6%QoQ despite 42%QoQ growth in unit sales due to
lower tariff. JSPL has guided to steel volumes of 2mt in FY11e and 2.5mn tons in
FY12e. We forecast steel EBITDA of Rs36.4bn in FY11 and Rs34.3bn in FY12.
Key takeaways from management call
The 2x135MW captive power units are still operating at 35% PLF, but JSPL
expects PLF to ramp up to 75% in 4Q. Orissa captive project time lines appear to
have been pushed back. JSPL now expects to start balance 8x135MW captive
power units during FY12. The 2400MW power project has been cleared by the
Advisory Committee, but work is on hold as final approval is awaited. 1.5mtpa HBI
unit at Oman has been commissioned, which could add ~5% to our FY12EPS.
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