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EARNINGS REVIEW
JSW Steel (JSTL.BO)
Buy Equity Research
Above expectations on EBITDA: Net misses on MTM FX losses
What surprised us
JSW Steel reported 2QFY12 standalone net income of Rs1.27 bn (-72% yoy, -
78% qoq) that includes a non-recurring forex translation loss of Rs5.13 bn.
Excluding this notional charge (for outstanding current liability of US$ 1.29
bn), the company’s adjusted net income came in at Rs4.8bn which was 75%
above GS and 96% above BBG consensus. At the operating level, EBITDA
came in at Rs12.9 bn (+31% yoy, -7% qoq), 34% above our expectations.
Top-line growth was robust, driven by: (1) higher sale volumes (+19% yoy,
+10% qoq) ,and (2) stable average realizations (+12% yoy, -2% qoq). EBITDA
margins surprised positively (EBITDA/ton at US$150, vs. GSe: US$122 vs. $180
in 4QFY11) on the back of better-than-expected cost control. Despite higher
cost of iron-ore and lower capacity utilization (production fell short by 455 kT
in the quarter), raw material cost per tonne increased only 6% qoq. Company
stated that capacity utilization at Vijaynagar has now improved to 50% (from
30%) as the iron ore supplies procured through the e-auction route have
commenced. Still, the company received only 18% of the iron ore sourced
through the auction mechanism so far.
What to do with the stock
We reiterate our Buy and increase our P/B-based 12m TP to Rs805 from Rs803
on higher estimates. We believe that iron ore supplies (and utilizations) could
normalize within six months, and FY13E will see a robust earnings growth for
the company. The stock is trading at 5.7X FY12E EVEBITDA, a 7% discount to
the mid-cycle of 6.1X; 11% discount to peers. We fine-tune our FY12E-14E EPS
estimates -0.1% to 11% due to minor non-operating changes in our model..
Risks: Steel demand, inability to pass through input cost pressures.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
EARNINGS REVIEW
JSW Steel (JSTL.BO)
Buy Equity Research
Above expectations on EBITDA: Net misses on MTM FX losses
What surprised us
JSW Steel reported 2QFY12 standalone net income of Rs1.27 bn (-72% yoy, -
78% qoq) that includes a non-recurring forex translation loss of Rs5.13 bn.
Excluding this notional charge (for outstanding current liability of US$ 1.29
bn), the company’s adjusted net income came in at Rs4.8bn which was 75%
above GS and 96% above BBG consensus. At the operating level, EBITDA
came in at Rs12.9 bn (+31% yoy, -7% qoq), 34% above our expectations.
Top-line growth was robust, driven by: (1) higher sale volumes (+19% yoy,
+10% qoq) ,and (2) stable average realizations (+12% yoy, -2% qoq). EBITDA
margins surprised positively (EBITDA/ton at US$150, vs. GSe: US$122 vs. $180
in 4QFY11) on the back of better-than-expected cost control. Despite higher
cost of iron-ore and lower capacity utilization (production fell short by 455 kT
in the quarter), raw material cost per tonne increased only 6% qoq. Company
stated that capacity utilization at Vijaynagar has now improved to 50% (from
30%) as the iron ore supplies procured through the e-auction route have
commenced. Still, the company received only 18% of the iron ore sourced
through the auction mechanism so far.
What to do with the stock
We reiterate our Buy and increase our P/B-based 12m TP to Rs805 from Rs803
on higher estimates. We believe that iron ore supplies (and utilizations) could
normalize within six months, and FY13E will see a robust earnings growth for
the company. The stock is trading at 5.7X FY12E EVEBITDA, a 7% discount to
the mid-cycle of 6.1X; 11% discount to peers. We fine-tune our FY12E-14E EPS
estimates -0.1% to 11% due to minor non-operating changes in our model..
Risks: Steel demand, inability to pass through input cost pressures.
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