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Big ambitions in coal mining
Jai Balaji Industries (JBIL) has increased its metallic and crude steel production
capacities at a CAGR of 62% and 42% to 954ktpa and 906ktpa, respectively over
FY07-10 through organic as well as inorganic means (merger of Sri Ramrupai
Balaji, acquisition of sponge capacities from HEG and Nilachal, etc). Capacity
utilization of aggregate DRI and pig iron facilities has improved consistently over
the years to 65% and 84%, respectively.
It has set up a 608ktpa sinter plant to reduce dependency on external lumps; this
plant is running at 100% capacity utilization and is contributing significantly to
reducing the cost of production of hot metal.
Its 111MW CPP utilizes waste gases of DRI kilns, blast furnaces and solid waste
generated from integrated operations, which helps to keep cost of power generation
low at Rs1.25/unit.
JBIL has set up a 240ktpa ductile iron (DI) pipe mill to improve product mix and tap
the increasing domestic demand for DI pipes. The mill started commercial production
in 3QFY11 and is expected to contribute significantly to margins in the near term.
The company has orders worth 50,000 tons in hand, as demand remains robust.
JBIL has rich reserves of coal allotted by state and central governments over the
years. These coal mines are at different stages of development. Dumri (non-coking
coal) and Rohne (coking coal) blocks are in advanced stages; forest and few more
statutory clearances are pending. Management expects to receive all approvals
for Dumri in 2-3 months. Coking coal production from Rohne block is expected to
start from June 2011. JBIL has total coal reserves of ~700m tons, the largest
among mid-cap steel companies in India.
It is setting up 0.35mtpa coke oven batteries at a capex of Rs3.6b, which will
further reduce its cost of production of hot metal.
JBIL is further planning to set up a 5mtpa integrated steel plant with 1,215MW
CPP in modular phases wherein it has firmed up phase-1 capex of Rs18.7b. It will
consist of a 1.2mtpa pellet plant, a 0.7mtpa sponge iron unit, a 75MW CPP based
on waste-heat recovery and a 450ktpa EAF steel making facility. JBIL has already
achieved financial closure of Rs12.3b for the same; the rest will be funded through
a mix of internal accruals and equity.
JBIL is focusing on ramping up DI pipe production, completion of coke oven facilities
and starting of captive coal in the near term. Capex requirement will remain high
over the next few years due to Purulia project. We expect capex of Rs2.5b in
FY11 and Rs6b in FY12.
Large coal reserves along with significant capacity addition plans to monetize
these reserves will help the company to post strong earnings growth over the next
3-4 years. We expect earnings to grow at a CAGR of 110% (on a lower base of
FY10, when JBIL suffered on account of high coking coal costs and reduced
demand) over FY10-13. The stock trades at 8.6x FY12E EPS and an EV of 7.9x
FY12E EBITDA. Maintain Buy.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Big ambitions in coal mining
Jai Balaji Industries (JBIL) has increased its metallic and crude steel production
capacities at a CAGR of 62% and 42% to 954ktpa and 906ktpa, respectively over
FY07-10 through organic as well as inorganic means (merger of Sri Ramrupai
Balaji, acquisition of sponge capacities from HEG and Nilachal, etc). Capacity
utilization of aggregate DRI and pig iron facilities has improved consistently over
the years to 65% and 84%, respectively.
It has set up a 608ktpa sinter plant to reduce dependency on external lumps; this
plant is running at 100% capacity utilization and is contributing significantly to
reducing the cost of production of hot metal.
Its 111MW CPP utilizes waste gases of DRI kilns, blast furnaces and solid waste
generated from integrated operations, which helps to keep cost of power generation
low at Rs1.25/unit.
JBIL has set up a 240ktpa ductile iron (DI) pipe mill to improve product mix and tap
the increasing domestic demand for DI pipes. The mill started commercial production
in 3QFY11 and is expected to contribute significantly to margins in the near term.
The company has orders worth 50,000 tons in hand, as demand remains robust.
JBIL has rich reserves of coal allotted by state and central governments over the
years. These coal mines are at different stages of development. Dumri (non-coking
coal) and Rohne (coking coal) blocks are in advanced stages; forest and few more
statutory clearances are pending. Management expects to receive all approvals
for Dumri in 2-3 months. Coking coal production from Rohne block is expected to
start from June 2011. JBIL has total coal reserves of ~700m tons, the largest
among mid-cap steel companies in India.
It is setting up 0.35mtpa coke oven batteries at a capex of Rs3.6b, which will
further reduce its cost of production of hot metal.
JBIL is further planning to set up a 5mtpa integrated steel plant with 1,215MW
CPP in modular phases wherein it has firmed up phase-1 capex of Rs18.7b. It will
consist of a 1.2mtpa pellet plant, a 0.7mtpa sponge iron unit, a 75MW CPP based
on waste-heat recovery and a 450ktpa EAF steel making facility. JBIL has already
achieved financial closure of Rs12.3b for the same; the rest will be funded through
a mix of internal accruals and equity.
JBIL is focusing on ramping up DI pipe production, completion of coke oven facilities
and starting of captive coal in the near term. Capex requirement will remain high
over the next few years due to Purulia project. We expect capex of Rs2.5b in
FY11 and Rs6b in FY12.
Large coal reserves along with significant capacity addition plans to monetize
these reserves will help the company to post strong earnings growth over the next
3-4 years. We expect earnings to grow at a CAGR of 110% (on a lower base of
FY10, when JBIL suffered on account of high coking coal costs and reduced
demand) over FY10-13. The stock trades at 8.6x FY12E EPS and an EV of 7.9x
FY12E EBITDA. Maintain Buy.
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