1QFY12 Earnings Preview- Steel relatively better off, while non ferrous, cement to be hit by higher coal, lower ASP: JP Morgan

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1QFY12 Earnings Preview- Steel relatively better off, while non ferrous, cement to be hit by higher coal, lower
ASP


 Steel- Lagged flow through of coking coal, higher long product prices to
benefit: While HRC price correction did take place through the quarter, long
product prices firmed up. Given that March quarter saw volumes being
impacted partly driven by de-stocking, June quarter volumes have been okay, as
import substitution has driven volumes in an overall weak market. High cost
coking coal would be partly there for the quarter. We expect TATA to report
India EBITDA/MT at $410/MT (flat q/q) helped also by the lagged flow
through of contract price increases in flat products. Corus should be more
muted at $70/MT given volumes have been weak even as ASP-RM mismatch
was in company’s favor in the qrtr. Reported earnings at TATA would have one
time gains from recent asset sales. We expect JSW EBITDA/MT at $175/MT
 Non Ferrous: HNDL- cost pressures to hit upstream aluminum, STLTlower
zinc earnings: We expect consolidated EBITDA at STLT at Rs24.3bn ,
down 20% q/q driven by 6% q/q decline in zinc prices and increasing coal costs.
We expect refined metal production at the zinc subsidiary at 175KT as the
smelter ramp up has been below expectations. Mined metal production (zinc +
lead) for the data available for April and May while +17% y/y at the zinc
subsidiary, is down only 3% q/q for the 2 month period (april+may over
Jan+Feb), suggesting that concentrate sales are likely to be there. STLT would
likely be impacted in aluminum and power segments negatively on higher coal
costs,though copper smelting should benefit from strong TC/RC. We expect
HNDL's standalone EBITDA to decline 7% q/q as the full impact of higher coal
costs and higher carbon costs impact earnings.
 Mining- COAL to report strong earnings as ASP hikes flow through: We
expect off take growth of 5% y/y and ASP increase of 16.5% y/y (given the
price increase in Feb and e-auction coal price increase). Q/Q ASP increase
would be muted given one offs are in the March quarter. We expect EBITDA at
Rs47bn, with wage costs increase flowing through next quarter. For MOIL we
expect earnings decline of 7% q/q given lower Mn ore prices.