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JSW Steel (JSTL.BO; Rs923.85; 1M)
Takeaways from Mumbai — JSW Steel presented at the Citi India Investor
Conference in Mumbai. Below are the key takeaways.
Raw material update — JSW Steel (JSTL) has begun iron ore mining operations
in Chile and expects sales of 1mt in FY12 and 2mt in FY13 (FOB cost $60-63/t),
giving it a hedge. JSTL has obtained three out of eight permits for its US coking
coal assets and expects to produce 0.5mt in FY12 (includes thermal coal) at an
FOB cost of around $160/t. In India, the company has set up 10mtpa of iron ore
beneficiation capacity and expects to set up another 15mtpa by mid FY12.
Expansion plans — JSTL’s capacity (excl Ispat’s 3.3mtpa) should rise to 11mtpa
(from 7.8mtpa) by 1QFY12 and another 2mtpa at Karnataka (capex Rs27bn) by
Jun13. JSTL completed the expansion of a HSM (hot strip mill) in FY11 and will
commission another 1.5mtpa by FY12 to enhance its product mix and reduce
sale of semis. It has plans to set up a 2.3mtpa cold rolling mill in two phases by
1QFY14and 1QFY15 – at an estimated capex of Rs40bn. The first phase of the
West Bengal project is now likely to be 3mt (4.5mtpa earlier) based on existing
clearances.
Ispat acquisition — JSTL hopes to achieve synergies, such as rationalization of
marketing effort, sourcing of iron ore, and captive availability of pellets/coke,
lower cost of power from JSW Energy (vs the grid) for Ispat to help cut costs.
Ispat restarted operations in Dec10 and produced 0.73mt during Jan-Mar11 (88%
utilization) and reported a profit of Rs700m. EBITDA/t was ~$100. JSW Steel
hopes that Ispat is able to make a sustainable EBITDA of Rs 5,000/t (which
appears difficult).
Steel outlook — Domestic prices were flat in April and May but have been
increased by Rs 500/t (1.5%) in June 2011. Management indicated that it was not
bogged down by cost pressures and has been able to achieve its targeted
volumes over the last few months. It expects EBITDA/t for FY11 to be around
$170/t.
Balance sheet – Cons. D/E was 0.84x as of Mar 11 vs 0.74x as of Dec 10. Cons.
Net debt/EBITDA was 2.9x. Net debt stood at Rs142bn ($3.1bn).
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��\\
JSW Steel (JSTL.BO; Rs923.85; 1M)
Takeaways from Mumbai — JSW Steel presented at the Citi India Investor
Conference in Mumbai. Below are the key takeaways.
Raw material update — JSW Steel (JSTL) has begun iron ore mining operations
in Chile and expects sales of 1mt in FY12 and 2mt in FY13 (FOB cost $60-63/t),
giving it a hedge. JSTL has obtained three out of eight permits for its US coking
coal assets and expects to produce 0.5mt in FY12 (includes thermal coal) at an
FOB cost of around $160/t. In India, the company has set up 10mtpa of iron ore
beneficiation capacity and expects to set up another 15mtpa by mid FY12.
Expansion plans — JSTL’s capacity (excl Ispat’s 3.3mtpa) should rise to 11mtpa
(from 7.8mtpa) by 1QFY12 and another 2mtpa at Karnataka (capex Rs27bn) by
Jun13. JSTL completed the expansion of a HSM (hot strip mill) in FY11 and will
commission another 1.5mtpa by FY12 to enhance its product mix and reduce
sale of semis. It has plans to set up a 2.3mtpa cold rolling mill in two phases by
1QFY14and 1QFY15 – at an estimated capex of Rs40bn. The first phase of the
West Bengal project is now likely to be 3mt (4.5mtpa earlier) based on existing
clearances.
Ispat acquisition — JSTL hopes to achieve synergies, such as rationalization of
marketing effort, sourcing of iron ore, and captive availability of pellets/coke,
lower cost of power from JSW Energy (vs the grid) for Ispat to help cut costs.
Ispat restarted operations in Dec10 and produced 0.73mt during Jan-Mar11 (88%
utilization) and reported a profit of Rs700m. EBITDA/t was ~$100. JSW Steel
hopes that Ispat is able to make a sustainable EBITDA of Rs 5,000/t (which
appears difficult).
Steel outlook — Domestic prices were flat in April and May but have been
increased by Rs 500/t (1.5%) in June 2011. Management indicated that it was not
bogged down by cost pressures and has been able to achieve its targeted
volumes over the last few months. It expects EBITDA/t for FY11 to be around
$170/t.
Balance sheet – Cons. D/E was 0.84x as of Mar 11 vs 0.74x as of Dec 10. Cons.
Net debt/EBITDA was 2.9x. Net debt stood at Rs142bn ($3.1bn).
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