Results better than expected on higher volumes
JSW Steel (JSTL) posted better than expected results for 4QFY13.
Consolidated EBITDA grew 30% QoQ (1% YoY) to INR17.3b. Standalone EBITDA
increased 29% QoQ (3% YoY) to INR169b (17% above our estimate) due to
higher volumes and slightly lower costs. Foreign subsidiaries continue to
disappoint, with total EBITDA of INR359m in 4QFY13 v/s INR607m in 4QFY12.
Standalone EBITDA remained subdued at USD129/ton (5% above est). Better
cost management by using various grades of coking coal aided margins.
Consolidated adjusted PAT declined 57% YoY to INR2.3b due to higher interest
and depreciation charge. Standalone adjusted PAT declined 15% YoY to INR4.7b.
The JSTL-Ispat merger has been approved by Bombay High Court and JSTL is
in the process of completing necessary formalities. Post merger, net cons.
debt will be INR270b (excluding acceptances of USD350m on capital account
and USD1.75b on revenue account). Net debt is estimated at INR386b.
The company has guided sales of 9.75m tons for FY14, subject to easing of iron
ore availability post starting of category A&B mines in Karnataka. We are
modeling 6%/11% sales volume growth to 9.4m tons/10.4m tons in FY14/FY15.
JSTL will be spending INR108b over the next three years (INR50b in FY14 +
INR40b in FY15) on various projects, which will improve the share of valueadded
products (VAP) and EAF (electric arc furnace) steel capacity by 1.5m tons.
Margin outlook subdued; valuations rich
Despite starting of category-A and category-B mines in Karnataka, iron ore
will remain in short supply due to depletion of iron ore inventories in the
state and significantly toned down mine capacity. This is likely to keep
margins under pressure. We expect EBITDA of USD119/ton in FY14 and
USD125/ton in FY15 on subdued realization and sticky costs of iron ore.
Exports, which helped sales during the quarter, have weakened again.
We expect margins to remain under pressure, led by weak steel prices and
sticky iron ore costs. Stock looks expensive at EV of 6.1x FY15E EBITDA. Sell.
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JSW Steel (JSTL) posted better than expected results for 4QFY13.
Consolidated EBITDA grew 30% QoQ (1% YoY) to INR17.3b. Standalone EBITDA
increased 29% QoQ (3% YoY) to INR169b (17% above our estimate) due to
higher volumes and slightly lower costs. Foreign subsidiaries continue to
disappoint, with total EBITDA of INR359m in 4QFY13 v/s INR607m in 4QFY12.
Standalone EBITDA remained subdued at USD129/ton (5% above est). Better
cost management by using various grades of coking coal aided margins.
Consolidated adjusted PAT declined 57% YoY to INR2.3b due to higher interest
and depreciation charge. Standalone adjusted PAT declined 15% YoY to INR4.7b.
The JSTL-Ispat merger has been approved by Bombay High Court and JSTL is
in the process of completing necessary formalities. Post merger, net cons.
debt will be INR270b (excluding acceptances of USD350m on capital account
and USD1.75b on revenue account). Net debt is estimated at INR386b.
The company has guided sales of 9.75m tons for FY14, subject to easing of iron
ore availability post starting of category A&B mines in Karnataka. We are
modeling 6%/11% sales volume growth to 9.4m tons/10.4m tons in FY14/FY15.
JSTL will be spending INR108b over the next three years (INR50b in FY14 +
INR40b in FY15) on various projects, which will improve the share of valueadded
products (VAP) and EAF (electric arc furnace) steel capacity by 1.5m tons.
Margin outlook subdued; valuations rich
Despite starting of category-A and category-B mines in Karnataka, iron ore
will remain in short supply due to depletion of iron ore inventories in the
state and significantly toned down mine capacity. This is likely to keep
margins under pressure. We expect EBITDA of USD119/ton in FY14 and
USD125/ton in FY15 on subdued realization and sticky costs of iron ore.
Exports, which helped sales during the quarter, have weakened again.
We expect margins to remain under pressure, led by weak steel prices and
sticky iron ore costs. Stock looks expensive at EV of 6.1x FY15E EBITDA. Sell.
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