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JINDAL STEEL & POWER LTD
Jindal Steel and Power Limited (JSPL) is one of India’s major steel producers
with a significant presence in sectors like Mining, Power Generation and
Infrastructure. With an annual turnover of over US $2.9 billion, JSPL is a part of
the about US $15 billion diversified O P Jindal Group and is consistently tapping
new opportunities by increasing production capacity, diversifying investments,
and leveraging its core capabilities to venture into new businesses. The company
has committed investments exceeding US$ 30 billion in the future and has several
business initiatives running simultaneously across continents.
Investment Rationale
Currently JSPL has operational capacity of 1,000MW at Tamnar, Chattisgarh,
which is one of the largest merchant capacities in India. In the near term the
company is likely to register a healthy profit from the power segment as the cost
of power generation remains broadly unchanged, given the company has a captive
coal mine.
JSPL is adding another 2,400MW of capacity at Tamnar (phase II) in two
phases of 1,200MW each. For some time clearances were pending on this project
but the project has received all the clearances recently. Hence, work is in progress
now and that should be a positive trigger for the stock.
On the steel business, the management guided that it is likely to commission
1.5-million-tonne plate mill in Angul, Orissa by the end of FY2012. Further,
during H1FY2013 a 2-million-tonne DRI plant at Angul is expected to come up.
The company is expected to add 1.6 million tonne of steel melting capacity by the
next one year.
JSPL plans to increase its steel capacity 4x over the next four years and power
capacity 10x in 10 years. JSPL has one of the best iron ore and coal resources in
India, with assets spread over various mineral-rich countries. Both its steel and
merchant power businesses are insulated from input prices.
The stock has underperformed over the last 18-20 months, due to anticipation
of slower earnings growth over FY11-13. We expect the stock to get re-rated
again, as the visibility of projects and earnings improves over the next 12 months.
Valuations
Amidst rising coal supply insecurity in India, the company stands out as one of the
few companies having captive coal resources. We believe the integrated status of
the company ensures it would generate better returns than the regulated players in
the power segment. The sock is currently trading at very attractive valuations of
11.3xFY11P/E. We recommend BUY with a target price of Rs 640 which is a
price appreciation of 41% from CMP.
India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details �� ��
JINDAL STEEL & POWER LTD
Jindal Steel and Power Limited (JSPL) is one of India’s major steel producers
with a significant presence in sectors like Mining, Power Generation and
Infrastructure. With an annual turnover of over US $2.9 billion, JSPL is a part of
the about US $15 billion diversified O P Jindal Group and is consistently tapping
new opportunities by increasing production capacity, diversifying investments,
and leveraging its core capabilities to venture into new businesses. The company
has committed investments exceeding US$ 30 billion in the future and has several
business initiatives running simultaneously across continents.
Investment Rationale
Currently JSPL has operational capacity of 1,000MW at Tamnar, Chattisgarh,
which is one of the largest merchant capacities in India. In the near term the
company is likely to register a healthy profit from the power segment as the cost
of power generation remains broadly unchanged, given the company has a captive
coal mine.
JSPL is adding another 2,400MW of capacity at Tamnar (phase II) in two
phases of 1,200MW each. For some time clearances were pending on this project
but the project has received all the clearances recently. Hence, work is in progress
now and that should be a positive trigger for the stock.
On the steel business, the management guided that it is likely to commission
1.5-million-tonne plate mill in Angul, Orissa by the end of FY2012. Further,
during H1FY2013 a 2-million-tonne DRI plant at Angul is expected to come up.
The company is expected to add 1.6 million tonne of steel melting capacity by the
next one year.
JSPL plans to increase its steel capacity 4x over the next four years and power
capacity 10x in 10 years. JSPL has one of the best iron ore and coal resources in
India, with assets spread over various mineral-rich countries. Both its steel and
merchant power businesses are insulated from input prices.
The stock has underperformed over the last 18-20 months, due to anticipation
of slower earnings growth over FY11-13. We expect the stock to get re-rated
again, as the visibility of projects and earnings improves over the next 12 months.
Valuations
Amidst rising coal supply insecurity in India, the company stands out as one of the
few companies having captive coal resources. We believe the integrated status of
the company ensures it would generate better returns than the regulated players in
the power segment. The sock is currently trading at very attractive valuations of
11.3xFY11P/E. We recommend BUY with a target price of Rs 640 which is a
price appreciation of 41% from CMP.
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