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Jai Balaji
Investors have been worried about their ability to execute the Purulia project.
Financial closure for Purulia phase 1A completed - Rs12.3bn debt by SBI-led
consortium and balance Rs6.4bn through internal accruals/fresh equity. Purulia
project is one of the largest steel projects in India (5m mtpa steel, 1,200MW
power), with 100% thermal coal integration, to be executed in modules to
address funding issues. Phase 1A of this project entails capex of Rs 18.7bn and
comprises of 2m mtpa beneficiation plant, 1.2m mtpa pallet plat, 0.66m mtpa
sponge iron, 70MW power and 0.3m mtpa EAF. We believe that this is a big
positive as it gives visibility on monetisation of the huge coal resources (700mn
tones) through this project.
Investors have also been concerned on visibility and ability on coal mines
monetisation. Development of Ragunathpur coal block is on track with mining
plan to be submitted in next 1-3 months and production expected to be
synchronised with Purulia. Dumri coal block forest clearance is expected in ext
2-3 months. Management also remains confident of starting production from
Rohne coking coal block (not built into our estimates (16% potential upside to
our fair value), given criticality of coking coal as a mineral resource for India
and investments already made into end-user plants.
JBIL has economic access to a 700m mt coal resource, among the biggest for an
India private sector firm. The mines are mainly underground, so present fewer
land/environmental approval issues than open-cast mines. With government
policy changing from allocation to auction, the value of this coal should become
evident.
Reiterate Buy, PT Rs450: We derive our PT from a DCF-based methodology
and explicitly forecast long-term valuation drivers using UBS’s VCAM tool
assuming WACC of 12.3% and 1% terminal growth, and implies 6.6x FY12E
EV/EBITDA. We believe the current share price only reflects the value of
existing operations (based on replacement cost and 4.6x FY12E EV/EBITDA, a
discount to peers). Coal resources and the Purulia expansion provide significant
long-term upside potential, in our view.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Jai Balaji
Investors have been worried about their ability to execute the Purulia project.
Financial closure for Purulia phase 1A completed - Rs12.3bn debt by SBI-led
consortium and balance Rs6.4bn through internal accruals/fresh equity. Purulia
project is one of the largest steel projects in India (5m mtpa steel, 1,200MW
power), with 100% thermal coal integration, to be executed in modules to
address funding issues. Phase 1A of this project entails capex of Rs 18.7bn and
comprises of 2m mtpa beneficiation plant, 1.2m mtpa pallet plat, 0.66m mtpa
sponge iron, 70MW power and 0.3m mtpa EAF. We believe that this is a big
positive as it gives visibility on monetisation of the huge coal resources (700mn
tones) through this project.
Investors have also been concerned on visibility and ability on coal mines
monetisation. Development of Ragunathpur coal block is on track with mining
plan to be submitted in next 1-3 months and production expected to be
synchronised with Purulia. Dumri coal block forest clearance is expected in ext
2-3 months. Management also remains confident of starting production from
Rohne coking coal block (not built into our estimates (16% potential upside to
our fair value), given criticality of coking coal as a mineral resource for India
and investments already made into end-user plants.
JBIL has economic access to a 700m mt coal resource, among the biggest for an
India private sector firm. The mines are mainly underground, so present fewer
land/environmental approval issues than open-cast mines. With government
policy changing from allocation to auction, the value of this coal should become
evident.
Reiterate Buy, PT Rs450: We derive our PT from a DCF-based methodology
and explicitly forecast long-term valuation drivers using UBS’s VCAM tool
assuming WACC of 12.3% and 1% terminal growth, and implies 6.6x FY12E
EV/EBITDA. We believe the current share price only reflects the value of
existing operations (based on replacement cost and 4.6x FY12E EV/EBITDA, a
discount to peers). Coal resources and the Purulia expansion provide significant
long-term upside potential, in our view.
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