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JSW steel reported consolidated EBITDA of Rs14.3bn, driven by saleable steel volumes of 1.7mt
and average realization of US$916/t. We have a Sell rating with a TP of Rs828.
1QFY12 results: A steady quarter
Consolidated net revenues were Rs74.3bn (+54% yoy and +3% qoq) driven by stronger-thanexpected
steel volumes and realizations. Crude steel production volumes were at 1,684kt and
saleable steel sales volumes were at 1,714kt. Despite the soft demand scenario, average
steel realizations increased 2% qoq to US$916/t due to better mix. However, despite flattish
volumes qoq, power and fuel costs noticeably increased to Rs4.1bn, up 32% qoq. The higher
top-line drove EBITDA to Rs14.3bn (+33% yoy and -14% qoq), 9% higher than our estimate
of Rs13.1bn. Steel EBITDA was US$181/t (-4% yoy and -13% qoq). Net profit was Rs4.8bn
(+64% yoy and -39% qoq). We note that financials of JSW Ispat were not consolidated as
associate income for this quarter since it is yet to report its financials.
Analyst meet highlights
The company shipped 194kt of iron ore concentrate during the quarter from its mines in Chile.
This contributed an EBITDA of US$11.5m and a net profit of US$7m. It expects to ship 350kt
in FY12, down from its earlier target of 550kt.
Production from its coking coal mine in the US is expected to commence in August after a
delay in finalizing local contractors. It expects to ship 1mt of coking coal for the year.
Capacity utilization at its US plate and pipe mill continued to improve and this earned an
EBITDA of US$3.5m though it posted a net loss.
With commissioning of the new beneficiation and pellet capacity, (total beneficiation capacity
at 23mt and pellet capacity at 9.2mt), it expects iron ore costs to be contained due to greater
use of lower grade fines.
Despite the closure of several iron ore mines in Karnataka to check illegal mining, the
company does not see a supply risk currently even at expanded 10mt capacity. However,
further closures could pose a risk.
The company is continuing its integration with Ispat and looking to optimize sales and costs. It
expects to achieve financial closure of Ispat's long term debt refinancing soon.
The 3.2mt brownfield capacity expansion at Vijayanagar is now complete with commissioning
of blast furnace-4 and sinter-plant-4. Management highlighted that it expects to achieve the
production target of 8.75mt of crude steel and saleable volumes of 9mt for FY12F. This will
include 735kt of Ispat steel volumes.
Management reiterated capex guidance of Rs150bn over the next three years with Rs80bn to
be spent in FY12 and the rest over FY13/14.
JSW steel is currently trading at 6.2x/5.4x FY12F/13F EV/EBITDA (compared to peer
averages of 6x/5.2x) and 11x/8.2x FY12F/13F PE (compared to peer averages of 9.6x/7.1x).
We have a Sell rating on JSW Steel with TP of Rs828.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
JSW steel reported consolidated EBITDA of Rs14.3bn, driven by saleable steel volumes of 1.7mt
and average realization of US$916/t. We have a Sell rating with a TP of Rs828.
1QFY12 results: A steady quarter
Consolidated net revenues were Rs74.3bn (+54% yoy and +3% qoq) driven by stronger-thanexpected
steel volumes and realizations. Crude steel production volumes were at 1,684kt and
saleable steel sales volumes were at 1,714kt. Despite the soft demand scenario, average
steel realizations increased 2% qoq to US$916/t due to better mix. However, despite flattish
volumes qoq, power and fuel costs noticeably increased to Rs4.1bn, up 32% qoq. The higher
top-line drove EBITDA to Rs14.3bn (+33% yoy and -14% qoq), 9% higher than our estimate
of Rs13.1bn. Steel EBITDA was US$181/t (-4% yoy and -13% qoq). Net profit was Rs4.8bn
(+64% yoy and -39% qoq). We note that financials of JSW Ispat were not consolidated as
associate income for this quarter since it is yet to report its financials.
Analyst meet highlights
The company shipped 194kt of iron ore concentrate during the quarter from its mines in Chile.
This contributed an EBITDA of US$11.5m and a net profit of US$7m. It expects to ship 350kt
in FY12, down from its earlier target of 550kt.
Production from its coking coal mine in the US is expected to commence in August after a
delay in finalizing local contractors. It expects to ship 1mt of coking coal for the year.
Capacity utilization at its US plate and pipe mill continued to improve and this earned an
EBITDA of US$3.5m though it posted a net loss.
With commissioning of the new beneficiation and pellet capacity, (total beneficiation capacity
at 23mt and pellet capacity at 9.2mt), it expects iron ore costs to be contained due to greater
use of lower grade fines.
Despite the closure of several iron ore mines in Karnataka to check illegal mining, the
company does not see a supply risk currently even at expanded 10mt capacity. However,
further closures could pose a risk.
The company is continuing its integration with Ispat and looking to optimize sales and costs. It
expects to achieve financial closure of Ispat's long term debt refinancing soon.
The 3.2mt brownfield capacity expansion at Vijayanagar is now complete with commissioning
of blast furnace-4 and sinter-plant-4. Management highlighted that it expects to achieve the
production target of 8.75mt of crude steel and saleable volumes of 9mt for FY12F. This will
include 735kt of Ispat steel volumes.
Management reiterated capex guidance of Rs150bn over the next three years with Rs80bn to
be spent in FY12 and the rest over FY13/14.
JSW steel is currently trading at 6.2x/5.4x FY12F/13F EV/EBITDA (compared to peer
averages of 6x/5.2x) and 11x/8.2x FY12F/13F PE (compared to peer averages of 9.6x/7.1x).
We have a Sell rating on JSW Steel with TP of Rs828.
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