Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
JSW Steel
Expansion on track, Mgmt confident of Ispat turnaround
Having met with management at our 15th Annual India Investor Conference
in New Delhi, these are some of our takeaways...
„...3mtpa expansion on track; FY12 volume guidance of 9mt
JSW expects to commission its 3mtpa brownfield expansion by March 11. JSW
expects steel production of 9mt in FY12. It plans to invest Rs40.2bn to set up a
new 2.3mtpa CRM unit in two phases (Phase by 1QFY14). It expects to start
construction of the JSW Bengal project by April 2011.
Management confident of Ispat turnaround
Jan utilizations have already improved to ~ 90% (72% in 2Q). It expects Ispat to
reach EBITDA breakeven by next Qtr. It expects to reach EBITDA/t of US$75-90/t
over the next 2-3 Qtrs. It plans to achieve this 1) through better input sourcing –
lower cost iron ore from Bellary instead of Orissa; 2) sourcing power from JSW
Energy at lower costs; 3) coke from Jindal Stainless instead of imports; and 4)
sourcing surplus pellets from its Vijaynagar unit. In the medium term it plans to
invest US$700mn for increasing capacity & setting up of power plant, pellet plant
etc.
Raw material integration to improve in FY12
Iron ore production started in DecQ and beneficiation is in progress in the current
Qtr. It expects to start next Qtr onwards and expects 1mt of shipments in FY12.
FOB cost of exports is expected to be US$60-65/t. It is still awaiting permits at two
of its US mines. It expects coking volumes of 1mn tons in FY12 (FoB ~US$85/t).
Other key highlights
JSW does not expect the Queensland flood to affect production as it has
adequate coking coal inventory. Proposed capex is Rs50bn in FY11 and ~Rs70bn
in FY12. Consol net gearing was 0.8x as on Dec Q. Gross debt was Rs143bn and
net debt was Rs123bn as on Dec Q. This excludes ~ Rs20bn of working capital
debt.
Price objective basis & risk
JSW Steel (XJWJF)
Our PO of Rs1140 is based on our NPV valuation. This assumes a WACC of
12.5% and a perpetuity growth of 0%. At our PO JSW would trade at 6.7x FY12E
EBITDA . Downside risks are lower-than-expected steel prices and volumes, and
higher input costs.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
JSW Steel
Expansion on track, Mgmt confident of Ispat turnaround
Having met with management at our 15th Annual India Investor Conference
in New Delhi, these are some of our takeaways...
„...3mtpa expansion on track; FY12 volume guidance of 9mt
JSW expects to commission its 3mtpa brownfield expansion by March 11. JSW
expects steel production of 9mt in FY12. It plans to invest Rs40.2bn to set up a
new 2.3mtpa CRM unit in two phases (Phase by 1QFY14). It expects to start
construction of the JSW Bengal project by April 2011.
Management confident of Ispat turnaround
Jan utilizations have already improved to ~ 90% (72% in 2Q). It expects Ispat to
reach EBITDA breakeven by next Qtr. It expects to reach EBITDA/t of US$75-90/t
over the next 2-3 Qtrs. It plans to achieve this 1) through better input sourcing –
lower cost iron ore from Bellary instead of Orissa; 2) sourcing power from JSW
Energy at lower costs; 3) coke from Jindal Stainless instead of imports; and 4)
sourcing surplus pellets from its Vijaynagar unit. In the medium term it plans to
invest US$700mn for increasing capacity & setting up of power plant, pellet plant
etc.
Raw material integration to improve in FY12
Iron ore production started in DecQ and beneficiation is in progress in the current
Qtr. It expects to start next Qtr onwards and expects 1mt of shipments in FY12.
FOB cost of exports is expected to be US$60-65/t. It is still awaiting permits at two
of its US mines. It expects coking volumes of 1mn tons in FY12 (FoB ~US$85/t).
Other key highlights
JSW does not expect the Queensland flood to affect production as it has
adequate coking coal inventory. Proposed capex is Rs50bn in FY11 and ~Rs70bn
in FY12. Consol net gearing was 0.8x as on Dec Q. Gross debt was Rs143bn and
net debt was Rs123bn as on Dec Q. This excludes ~ Rs20bn of working capital
debt.
Price objective basis & risk
JSW Steel (XJWJF)
Our PO of Rs1140 is based on our NPV valuation. This assumes a WACC of
12.5% and a perpetuity growth of 0%. At our PO JSW would trade at 6.7x FY12E
EBITDA . Downside risks are lower-than-expected steel prices and volumes, and
higher input costs.
No comments:
Post a Comment