Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
JSW Steel
Probable impact of Bellary mining ban
India’s Supreme Court has banned iron ore mining in
Karnataka’s Bellary district.
Given that JSW Steel sources most of its iron ore
requirement from Karnataka, it might have to source iron
ore from other regions at higher prices.
We conduct a sensitivity analysis to understand the
long-term impact of higher raw material prices on JSW
Steel.
Given uncertainty over the issue and how they will be
resolved, we maintain our earnings estimates and
IN-LINE rating.
Iron ore mining ban in Bellary district. The Supreme
Court has banned iron ore mining in the Bellary district of
Karnataka. The state produces around 45m tonnes of iron
ore annually, out of which 25-30m tonnes are from Bellary.
An ongoing investigation by the Central Empowered
Committee (CEC) into illegal mining in the state has lead to
the closure of many mines since May. This new ban affects
all mining activity in Bellary.
Impact on JSW Steel. JSW Steel’s 10m tpa Vijayanagar
plant sources iron ore primarily from Karnataka. Around
30% of its iron ore requirement is sourced from NMDC, 20%
through captive mining and the rest from private players.
The new ban in Bellary is likely to make it difficult for the
company to source iron ore locally. A worst case scenario
for JSW Steel is that the issue affects it for the next 3-4
quarters. In such a case, the company is likely to buy iron
ore from far off regions at export parity prices, raising
purchase and logistics costs.
Our sensitivity analysis shows that if the ban remains in
place for a long period and steel prices remain at current
levels, JSW Steel’s standalone EBITDA per tonne could fall
to US$105/tonne from Q1 FY12’s US$180/tonne. There is
potential for EBITDA to be impacted by 15.3% and net profit
by 34% compared with our current estimates. Our sales
estimate of 8.4m tonnes could also be breached on the
downside if there is iron ore scarcity.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
JSW Steel
Probable impact of Bellary mining ban
India’s Supreme Court has banned iron ore mining in
Karnataka’s Bellary district.
Given that JSW Steel sources most of its iron ore
requirement from Karnataka, it might have to source iron
ore from other regions at higher prices.
We conduct a sensitivity analysis to understand the
long-term impact of higher raw material prices on JSW
Steel.
Given uncertainty over the issue and how they will be
resolved, we maintain our earnings estimates and
IN-LINE rating.
Iron ore mining ban in Bellary district. The Supreme
Court has banned iron ore mining in the Bellary district of
Karnataka. The state produces around 45m tonnes of iron
ore annually, out of which 25-30m tonnes are from Bellary.
An ongoing investigation by the Central Empowered
Committee (CEC) into illegal mining in the state has lead to
the closure of many mines since May. This new ban affects
all mining activity in Bellary.
Impact on JSW Steel. JSW Steel’s 10m tpa Vijayanagar
plant sources iron ore primarily from Karnataka. Around
30% of its iron ore requirement is sourced from NMDC, 20%
through captive mining and the rest from private players.
The new ban in Bellary is likely to make it difficult for the
company to source iron ore locally. A worst case scenario
for JSW Steel is that the issue affects it for the next 3-4
quarters. In such a case, the company is likely to buy iron
ore from far off regions at export parity prices, raising
purchase and logistics costs.
Our sensitivity analysis shows that if the ban remains in
place for a long period and steel prices remain at current
levels, JSW Steel’s standalone EBITDA per tonne could fall
to US$105/tonne from Q1 FY12’s US$180/tonne. There is
potential for EBITDA to be impacted by 15.3% and net profit
by 34% compared with our current estimates. Our sales
estimate of 8.4m tonnes could also be breached on the
downside if there is iron ore scarcity.
No comments:
Post a Comment