JSW Steel: Good in a tough environment :: Kotak Securities

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Good in a tough environment. JSW Steel’s consolidated EBITDA declined 18% qoq to `23 bn (-5% yoy). JSTL delivered well in a tough environment given (1) narrowing conversion spreads due to decline in steel prices but firm domestic iron ore prices, and (2) volume pressure due to large imports. While weak steel prices will impact near-term margins, we expect conversion spreads to improve on (1) decline in domestic iron ore prices as supplies ease, and (2) revival in steel demand. We take cognizance of collapse in steel prices due to multiple global factors and cut steel price assumption by 5-12% and EBITDA by 3-8% for FY2015-17E. Maintain BUY rating with revised TP of `1,305, down from `1,490 earlier.

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Subdued performance… • JSW Steel’s Q3FY15 :: ICICI Securities, report

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JSW Steel - Weak Sector Fundamentals; Result Update ::Edelweiss

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Spreads under stress JSW Steel: HDFC Securities

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JSW Steel (Update) : Full steel ahead. Maintain BUY:: HDFC Securities

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JSW Steel : Q2FY15 Update: ICICI Securities, PDF link

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Sizzling Stocks: JSW Steel, Shriram City Union Finance :: Business Line

JSW Steel - Balance Sheet concerns now take centre-stage ::Credit Suisse

● The surprise during the quarter was the increase in debt. With just
Rs10 bn of the Rs50 bn of planned capex incurred, debt increased
by Rs34 bn QoQ. The INR fall (translation on forex debt) and the
increase in inventory we believe were the primary drivers.
● This underscores two concerns: 1) a weak INR helps revenues
very visibly, but it hurts too, especially when foreign currency debt
is taken due to the natural hedge of all sales effectively being in
USD; 2) Despite lower-than-normal production, inventory rose –
the targeted clearance in 2Q we fear may impact realisations.
● With capex continuing and EBITDA anemic, the rising debt burden
is already reaching unsustainable levels, in our view. With capex
still continuing and the domestic steel market unlikely to recover
meaningfully, debt/EBITDA ratio can be 5x by end-FY14.
● 1Q P&L was unexciting: sales missed by 4% and EBITDA 15%
(we take half of the forex loss on coking coal contracts in material
costs: without this EBITDA was 12% ahead). We cut estimates by
80/54% for FY14/15, and cut TP to Rs330 from Rs400, after
reducing debt by 50% of CWIP (else TP would be Rs124 lower).

Volumes surprise positively, maintain buy JSW Steel :: Centrum

Volumes surprise positively, maintain buy
JSW Steel (JSTL) reported strong operational performance yet again despite tough market conditions with ~11% QoQ growth in consolidated revenues to Rs98.5bn on account of robust sales volume of 2.4MT (higher than our expectation of 2.2 MT). Cons. EBITDA stood at ~Rs17.3bn (margin of ~17.6% vs our expectation of 17.1%) and standalone EBITDA/tonne stood at ~Rs6810/tonne (up by 14% QoQ). Better flat product sales, highest ever export volumes and aggressive marketing led to volume outperformance but realizations remained flat QoQ due to subdued demand. JSTL has indicated an increase in iron ore availability going ahead, further reduction in costs of coking coal and sounded aggressive volume guidance of 9.75MT for FY14E. We revise our volumes estimates upwards to factor in the strong operational capabilities of the company and improving iron ore situation in Karnataka. Maintain buy with an upward revised target of Rs924.

Volumes surprise positively: Sales volumes stood at 2.4MT, up ~5% YoY and 12% QoQ, supported by better product mix, aggressive marketing and higher flat product volumes, up 15% QoQ at 1.9MT. Realizations remained flat QoQ as domestic demand was subdued. Export stood at robust 0.64MT (+46% YoY,+67% QoQ). Inventory stood at 0.57 MT at FY13 end

EBITDA margin in line: Robust volumes and lower raw material costs (coking coal down by ~10% QoQ) led to standalone EBITDA margin of 17.9% (up by 220bps QoQ). JSW optimized its blending of coal for coke making and also increased waste heat utilization which helped in improving margins despite low quality and high cost iron ore

JSW steel, TP: INR569 Sell ::Motilal Oswal

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.

Strong operational show again, downgrade to neutral as upside looks capped JSW :: Centrum

Strong operational show again, downgrade to neutral as
upside looks capped
JSW Steel (JSTL) reported strong standalone operational performance yet again
despite iron ore procurement challenges with 5.3% YoY growth in consolidated
revenues to Rs82.7bn on account of robust sales volume of 2.2MT (higher than our
expectation of 2 MT). Cons. EBITDA stood at ~Rs13bn (margin of ~15.7% vs our
expectation of 14.9%) and standalone EBITDA/tonne stood at ~Rs5970/tonne.
Better long product sales and aggressive marketing led to volume
outperformance but realizations dropped sharply by ~6.3% QoQ. JSTL has
indicated an increase in iron ore availability going ahead, reduction in costs of
coking coal and maintained its volume guidance for FY13E. We see concerns
related to the company receding on raw material costs but remain concerned on
realizations, volumes and lower margin profile of the merged entity post its
merger with JSW-Ispat. We maintain our volume estimate of 8.8 MT for FY14E.
Post the recent run up in the stock, we downgrade our rating to Neutral from Buy.
Volumes higher but realizations drop sharply: Sales volumes stood at 2.2MT, up
~14% YoY, supported by better product mix, aggressive marketing and higher long
product volumes, up 6% QoQ at 0.43 MT. Realizations were down ~6.3% QoQ on
account of a drop in domestic steel prices amidst low demand from end customers and
skewed sales mix towards domestic sales.
EBITDA margin more than expected: Robust volumes and lower raw material costs
(coking coal down by ~5% QoQ and iron ore landed costs lower by 6% QoQ) led to
standalone EBITDA margin of 15.7% (above our expectation of 14.9%). We expect
margin to improve going ahead and expect that JSW would be able to maintain its
strong operational performance going ahead in FY13-14E with lower raw material costs
and better stability in prices from Q4FY13E onwards.

JSW Steel - Management Interaction Note :: Centrum

Management Interaction and Estimates Revision

JSW Steel

Buy

Target Price: Rs872

CMP: Rs745         

Upside: 17%

Better times ahead, maintain buy

We interacted with JSW Steel recently and were impressed with the company’s resistance to various external constraints through focus on value-addition and aggressive marketing. We see benefits of lower coking coal costs ahead with marginally better product realizations leading to better operating margin. We maintain our volume estimates but revise our EPS estimates upwards by 6%/8.1% for FY13E/14E. We revise our target price upwards to Rs872 and maintain buy rating.

JSW Steel - Iron ore sufficiency aids volume visibility; visit note; Buy:: Edelweiss

JSW Steel (JSTL IN, INR 674, Buy)

Key takeaways from our meeting with JSW Steel (JSW) management are: (a) with restart of category A mines in Karnataka, pending auction of ~4mt iron ore inventory, and possible blending of low grade iron ore, it sees no risk to the 8.5mt FY13 production guidance (our estimate 8mt); (b) project investments in Ispat to yield high returns and help double EBITDA in two years. We retain our estimates and maintain ‘BUY’.

How negative is the merger of JSWISPAT? ::Nomura research

News reports of merger of JSW Steel and JSW ISPAT; the company
has denied the news
There have been news reports suggesting that JSW ISPAT (JSWI IN,
not rated) might be merged into JSW Steel in next few weeks (Source:
business today, August 29, 2012). Earlier, management had guided that
the merger would happen once JSWI turns profitable. The company has
said that these are media rumours and asked us to ignore it. However,
we present below our view on the merger, if it happens.

JSW Steel - JSW Ispat Merger -Target Price: Rs732 :Centrum

JSW Steel - JSW Ispat Merger

Neutral

Target Price: Rs732

CMP: Rs694

Upside: 5.5%

Aggressive move in an adverse environment, downgrade to Neutral as valuations set to suffer

JSW Steel has announced the merger of its associate JSW Ispat with itself at a share swap ratio of 1:72 resulting in an equity dilution of 8.3% and creating the largest steel company in India by capacity (14.3 mtpa). We see the merger as impacting negatively on the merged entity in the short term on account of lower margin profile of the merged entity (drop of 160bps in FY14E), high debt levels (to increase by ~Rs78bn in FY14E) putting a strain on balance sheet, no immediate further equity infusion from JFE steel and absence of operational raw material assets in the portfolio. For FY14E, we see proforma EPS for the merged entity reducing 17.5% despite increase in EBITDA by 15.6% on account of lower margin, higher interest costs and equity dilution. We downgrade the stock to neutral from Buy with a target price of Rs732.

JSW Steel - JSW-Ispat merger: high scale, weak profitability; event update; Buy:: Edelweiss link

JSW Steel (JSTL IN, INR 694, Buy)

JSW Steel (JSW) has announced a merger with its 46.75% associate entity JSW Ispat (Ispat) in the ratio of 1:72. This merger makes JSW the largest steel company in India (14.3mtpa capacity) with potential synergy benefits of INR3-5bn p.a. over time. We currently ascribe negative equity valuation of INR31bn to Ispat considering its weak EBITDA and high net debt. The NPV of tax benefit of INR14bn does not offset this negative valuation and along with the 8.3% equity dilution leads to target price being revised down to INR868 (INR933 earlier). The proforma EPS for the merged entity is estimated to be revised down by ~10.6% and 9.7% for FY13 and FY14, respectively. This is despite 19.5% and 18.2% increase in FY13 and FY14 EBITDA estimates, respectively. Maintain ‘BUY’. 

Annual Report Analysis - JSW Steel :: Edelweiss PDF link

JSW Steel’s (JSW) FY12 annual report highlights another year in which operating cash flows was primarily supported by an increase in acceptances and higher bill discounting. Significant un-hedged payable position led to major forex loss of INR13.2bn, of which INR4.9bn has been capitalised while INR8.3 bn has been expensed off as exceptional; of this, forex loss of INR7.0bn has been realised. We are of the view that forex losses incurred on unhedged acceptances and creditors to the extent of interest rate differential between domestic and the foreign cost of funds should logically be considered as part of normal profitability.

Outlook - JSW Energy by Motilal Oswal

Outlook on JSW Energy by Rikesh Vinod Parikh Vice-President Markets Strategy and Product Development -Equities Motilal Oswal Financial Services Ltd.

JSW Energy: Reported numbers were below estimate, however adjusted for  if we add back forex loss overall numbers beats estimates. We are positive on the stock as coal prices in international markets are down and majority of power produced by JSW energy on merchant power basis it stands to benefit. Also it is likely to receive price revision at its Rajasthan unit post completion of expansion which will add to its profitability going forward. 

JSW Steel -Better days ahead ::Espirito Santo,

JSW Steel
Better days ahead
Our on the ground and industry checks indicate swift progress on
approvals for category A/B leases with final go-ahead for the mines
expected, once the Forest bench at the Supreme Court of India
resumes court hearings, from the second week of July onwards. We
think JSW Steel is poised to enter a sweet spot with low raw material
costs and higher volume growth, once category A/B iron ore mines in
Karnataka are opened. The shift from the current e-auction pricing
mechanism towards leaseholder determined base/floor prices should
result in falling fines’ prices. Interestingly, with the impending MMDR
bill, we think JSWS is well insulated on earnings impact, given its nonintegrated
nature. Factoring in concerns over ongoing CBI
investigations, we value JSWS at a 15% discount to its historical
average EV/EBITDA and have a FV of Rs755/share. JSWS now trades
at a 26% discount (4.9x FY13E EV/EBITDA) to its historical 5-year
average EV/EBITDA and we see value in the stock. Reiterate BUY.

JSW Steel denies Credit Suisse charge; says accounts intact : Money control

In response to Credit Suisse’s accusations, JSW Steel on Friday came out and said that they strongly object to the statements made by the brokerage firm, reports CNBC-TV18’s Kritika Saxena. Last week, Credit Suisse has released a statement which claimed that JSW Steel had under stated FY12 debt by around Rs 11,900 crore. As per Credit Suisse, the overall debt comes up to around Rs 28,500 crore, a fat amount considering the reported amount is Rs 16,600. Credit Suisse bases these accusations on three points; one is that acceptances have gone up and that hasn’t been factored in by the company.