Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Jindal Steel and Power's (JSP) 1QFY12 consolidated EBITDA of Rs16.2bn (+4% yoy and -6%
qoq) was 14% below our expectation. Lower earnings were driven by i) steel inventory buildup ii)
higher captive pellet consumption iii) raw material cost and iii) weak spot power tariffs.
Steel business: Strong growth despite odds
Steel production grew by 20% yoy to 607kt, however sales at 457kt were flat yoy indicating a
buildup in inventory levels. Pellet production grew by 344kt on a yoy basis but external sales
of pellets grew by just 123kt yoy indicating a higher proportion of consumption of pellets or
higher inventories. Pellets sell at about US$170/t in local markets and have margins in excess
of US$120/t. We were expecting all the incremental pellets to be sold in the spot markets.
Consolidated steel segment PBIT grew by 43% yoy and margins were at 27.9% compared to
29.2% yoy.
Power business: Spot tariffs keep drifting lower
Captive power production for the quarter was 931MU (+28% yoy) and sales were at 259MU
(+35% yoy) as a result of the commissioning of the new 540MW power over the last few
quarters. The PBIT margins for the captive power business fell sharply from 52% yoy to
36.4% due to the fact that these new power units are running at low PLF and are yet to be
fully stabilized. Also, a large part of the output from these new power plants is to be sold at
capped rates.
Jindal Power Ltd's (JPL) 1000MW merchant power plant operated at a PLF of 99.2% and
generated 2166MU (-2% yoy). Average realization however decreased to Rs3.5/unit (-18%
yoy and -9% qoq) vs our exp of Rs4/unit despite 1Q being historically strong due to summer
season and general elections in a few states. As a result, both revenues and net income of
JPL at Rs7.5bn and PAT at Rs4.5bn were down by 19% yoy.
Consolidated financials
Consolidated net revenues were Rs39.4bn (+32% yoy and +2% qoq) versus our est. of
Rs41.0bn. Raw material costs increased 43% qoq to Rs11.2bn. EBITDA was Rs16.2bn (+4%
yoy and -6% qoq) versus our estimate of Rs18.9bn. Interest expense increased sharply to
Rs1.1bn (+25% yoy and +19% qoq). Effective tax rate was 24% in-line with FY11 rate. Net
profit was Rs9.3bn (-3% yoy and -7% qoq) versus our estimate of Rs11.1bn. In the segmental
earnings, the unallocable expenditure has increased by 148% yoy and is about 15% of PBIT
for which we do not have details.
Earnings visibility to improve in coming quarters
The steel business PBIT has grown by 43% yoy despite its lower than expected volumes and
lower pellet sales. The share of the steel business to the overall PBIT is now 54% compared
to 42% yoy and would grow over the coming quarters as steel and pellet sales improve. The
power business margins look unlikely to improve in the near-term, however on an absolute
level, PBIT could be maintained with the commissioning of 810MW of power and stabilization
of the existing 540MW of the newly commissioned units of captive power.
Valuations
JSP currently trades at 12x/11.4x FY12/13F earnings (versus a peer average of 11.5x/9.2x)
and 8.3x/8.4x FY12/13F EV/EBITDA (versus a peer average of 7.3x/6.5x).
We have a Buy rating on JSP with TP of Rs800. More details would be available post the
earnings call scheduled at 2PM IST tomorrow.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Jindal Steel and Power's (JSP) 1QFY12 consolidated EBITDA of Rs16.2bn (+4% yoy and -6%
qoq) was 14% below our expectation. Lower earnings were driven by i) steel inventory buildup ii)
higher captive pellet consumption iii) raw material cost and iii) weak spot power tariffs.
Steel business: Strong growth despite odds
Steel production grew by 20% yoy to 607kt, however sales at 457kt were flat yoy indicating a
buildup in inventory levels. Pellet production grew by 344kt on a yoy basis but external sales
of pellets grew by just 123kt yoy indicating a higher proportion of consumption of pellets or
higher inventories. Pellets sell at about US$170/t in local markets and have margins in excess
of US$120/t. We were expecting all the incremental pellets to be sold in the spot markets.
Consolidated steel segment PBIT grew by 43% yoy and margins were at 27.9% compared to
29.2% yoy.
Power business: Spot tariffs keep drifting lower
Captive power production for the quarter was 931MU (+28% yoy) and sales were at 259MU
(+35% yoy) as a result of the commissioning of the new 540MW power over the last few
quarters. The PBIT margins for the captive power business fell sharply from 52% yoy to
36.4% due to the fact that these new power units are running at low PLF and are yet to be
fully stabilized. Also, a large part of the output from these new power plants is to be sold at
capped rates.
Jindal Power Ltd's (JPL) 1000MW merchant power plant operated at a PLF of 99.2% and
generated 2166MU (-2% yoy). Average realization however decreased to Rs3.5/unit (-18%
yoy and -9% qoq) vs our exp of Rs4/unit despite 1Q being historically strong due to summer
season and general elections in a few states. As a result, both revenues and net income of
JPL at Rs7.5bn and PAT at Rs4.5bn were down by 19% yoy.
Consolidated financials
Consolidated net revenues were Rs39.4bn (+32% yoy and +2% qoq) versus our est. of
Rs41.0bn. Raw material costs increased 43% qoq to Rs11.2bn. EBITDA was Rs16.2bn (+4%
yoy and -6% qoq) versus our estimate of Rs18.9bn. Interest expense increased sharply to
Rs1.1bn (+25% yoy and +19% qoq). Effective tax rate was 24% in-line with FY11 rate. Net
profit was Rs9.3bn (-3% yoy and -7% qoq) versus our estimate of Rs11.1bn. In the segmental
earnings, the unallocable expenditure has increased by 148% yoy and is about 15% of PBIT
for which we do not have details.
Earnings visibility to improve in coming quarters
The steel business PBIT has grown by 43% yoy despite its lower than expected volumes and
lower pellet sales. The share of the steel business to the overall PBIT is now 54% compared
to 42% yoy and would grow over the coming quarters as steel and pellet sales improve. The
power business margins look unlikely to improve in the near-term, however on an absolute
level, PBIT could be maintained with the commissioning of 810MW of power and stabilization
of the existing 540MW of the newly commissioned units of captive power.
Valuations
JSP currently trades at 12x/11.4x FY12/13F earnings (versus a peer average of 11.5x/9.2x)
and 8.3x/8.4x FY12/13F EV/EBITDA (versus a peer average of 7.3x/6.5x).
We have a Buy rating on JSP with TP of Rs800. More details would be available post the
earnings call scheduled at 2PM IST tomorrow.
No comments:
Post a Comment