JSW Steel - Satisfactory performance; challenges ahead :Emkay

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JSW Steel

Satisfactory performance; challenges ahead

ACCUMULATE

CMP: Rs870                                        Target Price: Rs1,016

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n     Q1FY12 performance came slightly better than our estimates. Topline rose 53% YoY and 2% QoQ to Rs 74.4 bn, backed by strong sales volume of 1.714 mt including 0.16 mt from Ispat     

n     Focus on value added products and change in raw material mix helped EBITDA to grow by 33% YoY and restricted QoQ fall to 14% to Rs 14.3 bn. EBITDA/ tonne came at US$181

n     Higher depreciation and interest costs on QoQ basis restricted the PAT at Rs 4.85 bn, up 64% YoY but down 39% QOQ. Consolidated PAT does not include Ispat’s performance

n     Margin pressure to be prominent going forward. Including Ispat’s contribution we revise our EPS to Rs 75 and Rs 99 for FY12E and FY13E respectively; Accumulate