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UBS Investment Research
Jai Balaji Industries
3QFY11 in line, maintain BUY
In-line 3Q numbers
JBIL reported Q3FY11 results late yesterday. Revenues of Rs 5785mn (+ 21%
QoQ, +28% YoY), EBITDA of Rs 895mn (+35% QoQ, 45% YoY) and net profit
of Rs 199mn (+71% QoQ, 191% YoY) were in line with expectations.
Positive operational improvement
3Q numbers reflect positive operational improvement with strong production
ramp-up - last 2 quarters had been marred by lower production due to iron ore
availability/pricing issues. Improved steel market dynamics and DI Pipe
commissioning aided 10% QOQ improvement in EBITDA/ton.
Projects update
Earlier this year, JBIL achieved financial closure for Purulia phase 1A - Rs12.3bn
debt by SBI-led consortium and balance Rs6.4bn through internal accruals/fresh
equity. Purulia Phase 1A entails capex of Rs 18.7bn and comprises of 2m mtpa
beneficiation plant, 1.2m mtpa pellet 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.
Valuation: Reiterate BUY with a PT of Rs450
We derive our PT from a DCF-based methodology. Coal resources and the
modular Purulia expansion provide significant long-term upside potential, in our
view. To fund this expansion, the company needs to generate positive and growing
cashflows over next 2-3 years. DI pipes and coke oven are key to earnings growth
over next 2 years.
Jai Balaji Industries
Jai Balaji Industries is an India-based iron and steel manufacturer, with
integrated production facilities primarily in West Bengal. Its products include
direct reduced iron (DRI), pig iron, ferro-alloys, steel billets, thermomechanically
treated (TMT) bars, and ductile iron (DI) pipes. It is one of the few
companies to successfully complete 1m mt greenfield capacity. It has access to
700m mt of coal resources, which it plans to use to expand in steel (5m mpta)
and power (1,200MW).
Statement of Risk
The key risks facing Jai Balaji Industries are execution risks, increase in interest
rates, lack of supportive funding for expansion plans, any deterioration in steel
cycle and underground coal mining risks.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
UBS Investment Research
Jai Balaji Industries
3QFY11 in line, maintain BUY
In-line 3Q numbers
JBIL reported Q3FY11 results late yesterday. Revenues of Rs 5785mn (+ 21%
QoQ, +28% YoY), EBITDA of Rs 895mn (+35% QoQ, 45% YoY) and net profit
of Rs 199mn (+71% QoQ, 191% YoY) were in line with expectations.
Positive operational improvement
3Q numbers reflect positive operational improvement with strong production
ramp-up - last 2 quarters had been marred by lower production due to iron ore
availability/pricing issues. Improved steel market dynamics and DI Pipe
commissioning aided 10% QOQ improvement in EBITDA/ton.
Projects update
Earlier this year, JBIL achieved financial closure for Purulia phase 1A - Rs12.3bn
debt by SBI-led consortium and balance Rs6.4bn through internal accruals/fresh
equity. Purulia Phase 1A entails capex of Rs 18.7bn and comprises of 2m mtpa
beneficiation plant, 1.2m mtpa pellet 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.
Valuation: Reiterate BUY with a PT of Rs450
We derive our PT from a DCF-based methodology. Coal resources and the
modular Purulia expansion provide significant long-term upside potential, in our
view. To fund this expansion, the company needs to generate positive and growing
cashflows over next 2-3 years. DI pipes and coke oven are key to earnings growth
over next 2 years.
Jai Balaji Industries
Jai Balaji Industries is an India-based iron and steel manufacturer, with
integrated production facilities primarily in West Bengal. Its products include
direct reduced iron (DRI), pig iron, ferro-alloys, steel billets, thermomechanically
treated (TMT) bars, and ductile iron (DI) pipes. It is one of the few
companies to successfully complete 1m mt greenfield capacity. It has access to
700m mt of coal resources, which it plans to use to expand in steel (5m mpta)
and power (1,200MW).
Statement of Risk
The key risks facing Jai Balaji Industries are execution risks, increase in interest
rates, lack of supportive funding for expansion plans, any deterioration in steel
cycle and underground coal mining risks.
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