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UBS Investment Research
JSW Steel
Q 1FY12 results beat estimates
Event: Numbers beat estimates due to higher than expected ASPs
Q4 standalone PAT at Rs5.78bn (+65%YoY, -31%QoQ, UBS-e Rs4.8bn / cons
est. Rs4.9bn) and EBITDA at Rs13.9bn (+39%YoY, -12%QoQ, UBS-e Rs11.7bn,
cons est. Rs12.4bn) were driven by higher net sales of Rs70.6bn (+52%YoY,
0.5%QoQ, UBS-e Rs67.6bn, Cons Rs68.5bn). Positive surprise was due to higher
than expected ASPs - up 1% QoQ to US$916/t (UBS-e US$879/t). EBITDA/t was
US$180/t (-11%QoQ, UBS-e US$152/t). Cons PAT rose 64% YoY to Rs4.9bn.
Impact: Doesn’t change our outlook; Q2 to be depressed due to coking coal
While results have been higher than estimates we believe this doesn’t change our
earnings outlook for JSW. Q2 results are likely to be weak given impact of higher
coking coal costs and lower steel prices. Gross debt is US$3.63bn (Rs163bn), net
debt is US$3.4bn (Rs153bn) while cons D/E is 0.89x (0.84x in FY11 end). Con
Net Debt /EBITDA is 2.9x
Action: Maintain our earnings estimates for FY12/13
We maintain our earnings estimates for FY12/13. Given domestic steel demand
slowdown (1.5% growth in Apr-Jun 2011) there could be some downside to our
volume assumption of 8.6mt in FY12 (co. guidance: 9mt). However, there could be
7/8% upside in EBITDA in FY12/13 from iron ore/coal sales from Chile/US mines
(which we don’t factor). We estimate EBITDA/t of US$137/175 in FY12/13.
Valuation: Maintain Buy and price target of Rs1300
We continue to value JSW Steel on a sum-of-the-parts basis with the core business
at a mid-cycle multiple of 6.7x EV/EBITDA using normalized FY12-13 EBITDA.
JSW Steel
JSW Steel, a flagship of the Sajjan Jindal group, is the fastest growing steel
company in India. It targets to increase crude steel capacity from 3.8m tonnes at
present to 10m tonnes by 2010.With the proposed integration of SISCOL
(Southern Iron and Steel Company Ltd), JSW will become the third largest steel
company in the country in terms of volume. It was the first Indian company to
operate steel making units in 1994 using the coal reduction (Corex) process. In
August 2007, JSW acquired a plates and pipes business in the US in order to
move into higher value-added steel products.
Statement of Risk
Our earnings estimates and valuation are subject to fluctuations based on global
and domestic steel prices and the prices of key raw materials such as coking coal,
which are difficult to predict.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
UBS Investment Research
JSW Steel
Q 1FY12 results beat estimates
Event: Numbers beat estimates due to higher than expected ASPs
Q4 standalone PAT at Rs5.78bn (+65%YoY, -31%QoQ, UBS-e Rs4.8bn / cons
est. Rs4.9bn) and EBITDA at Rs13.9bn (+39%YoY, -12%QoQ, UBS-e Rs11.7bn,
cons est. Rs12.4bn) were driven by higher net sales of Rs70.6bn (+52%YoY,
0.5%QoQ, UBS-e Rs67.6bn, Cons Rs68.5bn). Positive surprise was due to higher
than expected ASPs - up 1% QoQ to US$916/t (UBS-e US$879/t). EBITDA/t was
US$180/t (-11%QoQ, UBS-e US$152/t). Cons PAT rose 64% YoY to Rs4.9bn.
Impact: Doesn’t change our outlook; Q2 to be depressed due to coking coal
While results have been higher than estimates we believe this doesn’t change our
earnings outlook for JSW. Q2 results are likely to be weak given impact of higher
coking coal costs and lower steel prices. Gross debt is US$3.63bn (Rs163bn), net
debt is US$3.4bn (Rs153bn) while cons D/E is 0.89x (0.84x in FY11 end). Con
Net Debt /EBITDA is 2.9x
Action: Maintain our earnings estimates for FY12/13
We maintain our earnings estimates for FY12/13. Given domestic steel demand
slowdown (1.5% growth in Apr-Jun 2011) there could be some downside to our
volume assumption of 8.6mt in FY12 (co. guidance: 9mt). However, there could be
7/8% upside in EBITDA in FY12/13 from iron ore/coal sales from Chile/US mines
(which we don’t factor). We estimate EBITDA/t of US$137/175 in FY12/13.
Valuation: Maintain Buy and price target of Rs1300
We continue to value JSW Steel on a sum-of-the-parts basis with the core business
at a mid-cycle multiple of 6.7x EV/EBITDA using normalized FY12-13 EBITDA.
JSW Steel
JSW Steel, a flagship of the Sajjan Jindal group, is the fastest growing steel
company in India. It targets to increase crude steel capacity from 3.8m tonnes at
present to 10m tonnes by 2010.With the proposed integration of SISCOL
(Southern Iron and Steel Company Ltd), JSW will become the third largest steel
company in the country in terms of volume. It was the first Indian company to
operate steel making units in 1994 using the coal reduction (Corex) process. In
August 2007, JSW acquired a plates and pipes business in the US in order to
move into higher value-added steel products.
Statement of Risk
Our earnings estimates and valuation are subject to fluctuations based on global
and domestic steel prices and the prices of key raw materials such as coking coal,
which are difficult to predict.
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