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India Equity Research Reports, IPO and Stock News
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Strong 4QFY11 results
JSW’s 4Q EBITDA/t rose 52% QoQ to US$215/t and drove 26% beat at net
profit. However, margins will decline in 1HFY12 as the impact of US$330/t
coking coal will flow through. JSW has finally achieved some progress in its
overseas mining projects, which could now lead to some upside to our
estimates. The 3.2mtpa expansion at Vijaynagar will come online in Jun-11
and will drive strong volume growth over FY12-13. Plan for further expansion
to 12mtpa by Jun-13 is a positive as it will extend the growth profile beyond
FY13. We are incrementally positive on JSW given stronger than expected 4Q
results, progress in overseas mining projects and new India expansion plans.
Strong 4Q results but margins likely to decline near-term
JSW reported 4Q net profit of Rs8.3bn – up 29% YoY and 26% above estimates
led by higher-than-expected volumes and lower raw material costs. 4Q volumes
were at 1.7mt, up 14% YoY and ahead of estimates. ASPs were up 12% QoQ – in
line with expectations. EBITDA came in at Rs16.5bn - up 24% YoY and 16% above
estimates. EBITDA/t rose 52% QoQ to US$215/t - 9% above estimates due to
lower-than-expected raw material and power costs. However, we expect margins
to decline in 1H12 as the impact of US$330/t coking coal will flow through.
Progress in overseas mining projects finally
JSW has finally achieved some progress in its overseas mining projects. It has
started shipments from Chilean iron ore mines in Apr-11 and is targeting 1mtpa
production in FY12. JSW has also received all permits to start operations at its US
coking coal mines and plans to start production in Jul-11. We have not assigned
any value to these projects yet, and hence these could lead to potential upside.
The US mills continued to disappoint with low utilization in 4Q. JSW is targeting
40% utilization and positive net profit in FY12; but we remain cautious here.
Expansion to 12mtpa at Vijaynagar – a positive
JSW’s 3.2mtpa expansion to 10mtpa capacity at Vijaynagar is slightly delayed and
will now be commissioned in Jun-11. JSW has also announced further expansion
to 12mtpa at Vijaynagar by Jun-13 via debottlenecking of existing blast furnace
and setting up of a new electric arc furnace. While this Rs27bn project will
increase capex and gearing near-term, we see the project as a positive as it will
extend JSW’s growth profile beyond FY13.
Incrementally positive post-4Q results; we will revisit estimates shortly
We are incrementally positive on JSW given– (1) better-than-expected 4Q results,
(2) progress in the overseas mining projects, and (3) plan for further expansion at
Vijaynagar from 10mtpa to 12mtpa by Jun-13. We continue to have concerns on
rising capex and debt levels near-term, but believe that most of the risks are
priced in post 21% underperformance vs. the Sensex in YTD-CY11 We will review
our estimates shortly post some clarifications from the management. Retain O-PF.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Strong 4QFY11 results
JSW’s 4Q EBITDA/t rose 52% QoQ to US$215/t and drove 26% beat at net
profit. However, margins will decline in 1HFY12 as the impact of US$330/t
coking coal will flow through. JSW has finally achieved some progress in its
overseas mining projects, which could now lead to some upside to our
estimates. The 3.2mtpa expansion at Vijaynagar will come online in Jun-11
and will drive strong volume growth over FY12-13. Plan for further expansion
to 12mtpa by Jun-13 is a positive as it will extend the growth profile beyond
FY13. We are incrementally positive on JSW given stronger than expected 4Q
results, progress in overseas mining projects and new India expansion plans.
Strong 4Q results but margins likely to decline near-term
JSW reported 4Q net profit of Rs8.3bn – up 29% YoY and 26% above estimates
led by higher-than-expected volumes and lower raw material costs. 4Q volumes
were at 1.7mt, up 14% YoY and ahead of estimates. ASPs were up 12% QoQ – in
line with expectations. EBITDA came in at Rs16.5bn - up 24% YoY and 16% above
estimates. EBITDA/t rose 52% QoQ to US$215/t - 9% above estimates due to
lower-than-expected raw material and power costs. However, we expect margins
to decline in 1H12 as the impact of US$330/t coking coal will flow through.
Progress in overseas mining projects finally
JSW has finally achieved some progress in its overseas mining projects. It has
started shipments from Chilean iron ore mines in Apr-11 and is targeting 1mtpa
production in FY12. JSW has also received all permits to start operations at its US
coking coal mines and plans to start production in Jul-11. We have not assigned
any value to these projects yet, and hence these could lead to potential upside.
The US mills continued to disappoint with low utilization in 4Q. JSW is targeting
40% utilization and positive net profit in FY12; but we remain cautious here.
Expansion to 12mtpa at Vijaynagar – a positive
JSW’s 3.2mtpa expansion to 10mtpa capacity at Vijaynagar is slightly delayed and
will now be commissioned in Jun-11. JSW has also announced further expansion
to 12mtpa at Vijaynagar by Jun-13 via debottlenecking of existing blast furnace
and setting up of a new electric arc furnace. While this Rs27bn project will
increase capex and gearing near-term, we see the project as a positive as it will
extend JSW’s growth profile beyond FY13.
Incrementally positive post-4Q results; we will revisit estimates shortly
We are incrementally positive on JSW given– (1) better-than-expected 4Q results,
(2) progress in the overseas mining projects, and (3) plan for further expansion at
Vijaynagar from 10mtpa to 12mtpa by Jun-13. We continue to have concerns on
rising capex and debt levels near-term, but believe that most of the risks are
priced in post 21% underperformance vs. the Sensex in YTD-CY11 We will review
our estimates shortly post some clarifications from the management. Retain O-PF.
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