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Sufficient coking coal stocks until March, spot prices not viable
Coking coal: JSTL has sufficient stocks until March-2011; in addition it has sourced c75,000t from the US at USD225/t;
expects end-production demand destruction at USD300/t and therefore sees recent spike in spot prices as unviable.
Inline with previous communication, the company expects strong 4Q FY11 EBITDA/t (at USD170+).
ISPAT acquisition: expects near term improvement in EBITDA/t at INR3,500-4,000.
Key synergies outlined:
INR900-1,000/t saving on transportation costs.
VAT benefits from ISPAT to the tune of INR1,400/t.
Iron ore sourcing from Bellary much cheaper than Orissa.
Cheaper power from JSW Energy (INR4.5 unit vs INR6 unit that ISPAT currently pays).
US subsidiary: company has a new CEO. Sees breakeven PAT at 35% utilization (15% currently).
Valuation and risks
We value JSW on FY12e EV/EBITDA of 6.5x. We derive a target price of INR1,370 and are Neutral (V) on the stock.
Key downside risks include unfavourable steel and raw material price movement. Timely execution of 3.2mtpa expansion
at Vijaynagar is also a key risk.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Sufficient coking coal stocks until March, spot prices not viable
Coking coal: JSTL has sufficient stocks until March-2011; in addition it has sourced c75,000t from the US at USD225/t;
expects end-production demand destruction at USD300/t and therefore sees recent spike in spot prices as unviable.
Inline with previous communication, the company expects strong 4Q FY11 EBITDA/t (at USD170+).
ISPAT acquisition: expects near term improvement in EBITDA/t at INR3,500-4,000.
Key synergies outlined:
INR900-1,000/t saving on transportation costs.
VAT benefits from ISPAT to the tune of INR1,400/t.
Iron ore sourcing from Bellary much cheaper than Orissa.
Cheaper power from JSW Energy (INR4.5 unit vs INR6 unit that ISPAT currently pays).
US subsidiary: company has a new CEO. Sees breakeven PAT at 35% utilization (15% currently).
Valuation and risks
We value JSW on FY12e EV/EBITDA of 6.5x. We derive a target price of INR1,370 and are Neutral (V) on the stock.
Key downside risks include unfavourable steel and raw material price movement. Timely execution of 3.2mtpa expansion
at Vijaynagar is also a key risk.
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