16 June 2012
Jindal Steel & Power (JSP IN, INR 437, Buy)
Jindal Steel & Power (JSPL) expects the Orissa government to revise favorably the free power supply clause from captive coal fuelled CPP’s from 33% to 13%. This should create ground for start of UtkalB1 coal mine operations by end FY13. We estimate the mine’s DCF valuation at INR51/share. Phase-II of Angul steel plant (5.5mtpa capacity) is ready for launch and part of the iron ore requirement is secured. While benefits of this expansion will be back-ended, JSPL’s consolidated D:E of 1.0 will comfortably absorb the increased debt in the interim. We retain estimates and maintain ‘BUY’with a target price of INR648.