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JSW Steel : Dismal performance…
JSW Steel posted Q3FY11 consolidated net sales of | 6002.6 crore,
which was in line with our expectation of | 5939 crore due to better
sales volume of 1.593 MT. EBITDA was lower than our estimates at |
1016 crore as against our expectation of | 1135 crore. EBITDA margin
declined by 540 bps YoY but sequentially stood flat at ~17%. The
contraction in margins was mainly due to higher cost of raw materials.
During the quarter, the company repaid debt of ~| 505 crore. Due to
this, its interest cost declined ~24% QoQ and YoY. However, PAT on a
consolidated basis, came at | 291.7 crore, lower than our expectation of
| 413.5 crore, mainly due to lower operating performance and lower
other income as there was no significant forex gain in Q3FY11.
ƒ EBITDA/tonne remains flat QoQ
JSW’s EBITDA/tonne for Q3FY11 stood at | 6392/tonne remaining
flat sequentially as realisations remained flat. However, it declined
by 13% YoY on the back of higher cost. The raw material cost
registered a jump of 33% YoY and was marginally up by 0.7% QoQ.
ƒ Expansion plans
JSW is planning to set up a new cold rolling mill complex of 2.3
MTPA in two phases at an investment of | 4000crore. The Phase 1 is
expected to start in FY12 and get completed by Q1CY13–14 while
Phase 2 is expected to be complete in FY15. This expansion is
proposed to be funded by a mix of D/E of 2:1. The company has
acquired the 0.5 MTPA steel plant of Bellary Steel and Alloys Ltd for
a consideration of | 210 crore. Under this asset buyout, the
company will also acquire freehold land of 700 acres, which JSW
plans to use as a warehouse or stockyard.
Valuation
At the CMP of | 916, the stock is discounting its FY12E earning by 15.3x
and FY12E EV/EBITDA by 7.3x. We continue to value the stock at 6x its
FY12 EV/EBITDA and have reduced our target price to | 923 per share.
We recommend an ADD rating on the stock.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
JSW Steel : Dismal performance…
JSW Steel posted Q3FY11 consolidated net sales of | 6002.6 crore,
which was in line with our expectation of | 5939 crore due to better
sales volume of 1.593 MT. EBITDA was lower than our estimates at |
1016 crore as against our expectation of | 1135 crore. EBITDA margin
declined by 540 bps YoY but sequentially stood flat at ~17%. The
contraction in margins was mainly due to higher cost of raw materials.
During the quarter, the company repaid debt of ~| 505 crore. Due to
this, its interest cost declined ~24% QoQ and YoY. However, PAT on a
consolidated basis, came at | 291.7 crore, lower than our expectation of
| 413.5 crore, mainly due to lower operating performance and lower
other income as there was no significant forex gain in Q3FY11.
ƒ EBITDA/tonne remains flat QoQ
JSW’s EBITDA/tonne for Q3FY11 stood at | 6392/tonne remaining
flat sequentially as realisations remained flat. However, it declined
by 13% YoY on the back of higher cost. The raw material cost
registered a jump of 33% YoY and was marginally up by 0.7% QoQ.
ƒ Expansion plans
JSW is planning to set up a new cold rolling mill complex of 2.3
MTPA in two phases at an investment of | 4000crore. The Phase 1 is
expected to start in FY12 and get completed by Q1CY13–14 while
Phase 2 is expected to be complete in FY15. This expansion is
proposed to be funded by a mix of D/E of 2:1. The company has
acquired the 0.5 MTPA steel plant of Bellary Steel and Alloys Ltd for
a consideration of | 210 crore. Under this asset buyout, the
company will also acquire freehold land of 700 acres, which JSW
plans to use as a warehouse or stockyard.
Valuation
At the CMP of | 916, the stock is discounting its FY12E earning by 15.3x
and FY12E EV/EBITDA by 7.3x. We continue to value the stock at 6x its
FY12 EV/EBITDA and have reduced our target price to | 923 per share.
We recommend an ADD rating on the stock.
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