Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
EARNINGS REVIEW
JSW Steel (JSTL.BO)
Buy Equity Research
Below expectations on non-operating items; EBITDA in line
What surprised us
JSW Steel reported 3QFY11 consolidated net income of Rs2.9bn (-32%
yoy, -22% qoq), 26% below our and Bloomberg consensus expectations on
lower forex gain (Rs80mn vs. Rs1,030mn in 3QFY10). At the operating
level, EBITDA came in at Rs10.2bn (-6% yoy, -1% qoq), in line with
our expectations. Top-line growth was robust, driven by (1) record sales
volumes (+12% yoy, +1% qoq); and (2) higher average realizations (+13%
yoy, flat qoq). While benchmark steel prices were down 3%-4% qoq, stable
realizations can be attributed to improved product mix. EBITDA margins
were stable sequentially with EBITDA/ton at US$140 (GSe: US$140) vs.
$135 in 2QFY11. US operations continued to disappoint, with EBITDA of
US$1.7mn (2QFY11: US$0.8mn), on weak utilizations, realizations. The
company announced a new downstream cold-rolled steel project, with a
capacity of 2.3mn tons, to be commissioned by FY14E (capex of Rs40bn).
According to the company, iron ore mining in Chile has commenced, and
could contribute 1mn tons in FY12. US coking coal mines are expected to
supply 1mn tons in FY12. Net debt/equity currently stands at 0.7X.
What to do with the stock
We reiterate our Buy rating and 12-mo P/B-based TP of Rs1,286; in our
view, JSW is in the best position to capitalize on a recovery in steel
pricing, given its sector-leading FY12E volume growth (+41% yoy),
improving upstream integration, and leverage to steel prices. We expect a
15% increase in prices in 4QFY11, led by robust demand and cost push.
The stock is trading at 5.7X FY12E EV/EBITDA, 7% disc to the mid-cycle of
6.1X, and 5% disc to peers. We lower our FY11E-13E EPS by 1%-4% to
account for higher interest expense. Risks: delays in project execution
India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details �� ��
EARNINGS REVIEW
JSW Steel (JSTL.BO)
Buy Equity Research
Below expectations on non-operating items; EBITDA in line
What surprised us
JSW Steel reported 3QFY11 consolidated net income of Rs2.9bn (-32%
yoy, -22% qoq), 26% below our and Bloomberg consensus expectations on
lower forex gain (Rs80mn vs. Rs1,030mn in 3QFY10). At the operating
level, EBITDA came in at Rs10.2bn (-6% yoy, -1% qoq), in line with
our expectations. Top-line growth was robust, driven by (1) record sales
volumes (+12% yoy, +1% qoq); and (2) higher average realizations (+13%
yoy, flat qoq). While benchmark steel prices were down 3%-4% qoq, stable
realizations can be attributed to improved product mix. EBITDA margins
were stable sequentially with EBITDA/ton at US$140 (GSe: US$140) vs.
$135 in 2QFY11. US operations continued to disappoint, with EBITDA of
US$1.7mn (2QFY11: US$0.8mn), on weak utilizations, realizations. The
company announced a new downstream cold-rolled steel project, with a
capacity of 2.3mn tons, to be commissioned by FY14E (capex of Rs40bn).
According to the company, iron ore mining in Chile has commenced, and
could contribute 1mn tons in FY12. US coking coal mines are expected to
supply 1mn tons in FY12. Net debt/equity currently stands at 0.7X.
What to do with the stock
We reiterate our Buy rating and 12-mo P/B-based TP of Rs1,286; in our
view, JSW is in the best position to capitalize on a recovery in steel
pricing, given its sector-leading FY12E volume growth (+41% yoy),
improving upstream integration, and leverage to steel prices. We expect a
15% increase in prices in 4QFY11, led by robust demand and cost push.
The stock is trading at 5.7X FY12E EV/EBITDA, 7% disc to the mid-cycle of
6.1X, and 5% disc to peers. We lower our FY11E-13E EPS by 1%-4% to
account for higher interest expense. Risks: delays in project execution
No comments:
Post a Comment