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 PAT declined 8% QoQ to INR9.2b (against our estimate of
INR11.4b) due to lower-than-expected sales of steel products and lower pellet production. Net sales declined 8%
QoQ to INR25.3b due to lower steel sales because of weak market conditions.
Pellet plant reached production of 4mtpa but production in 1QFY12 disappointed, declining 4% QoQ to 828,800 tons
due to logistic bottlenecks in the Barbil region.
Captive power generation declined 7% QoQ to 931m kWh as Tamnar units (2x135MW) still face teething problems
despite being commissioned 8-10 months ago. Average PLF achieved was 50-55%.
Overseas operations contributed INR110m to the bottom line. Profits from Oman and South Africa mines were
partially offset by other corporate overseas experimental investment activities.
JSP's PAT declined 9% QoQ to INR4.5b against our estimate of INR4.7b. Average rate was INR3.92/kWh, in line with
our estimate of INR3.9/kWh. Merchant power rates were INR4.19/kWh. We expect ordering for Goda and Dumka
projects within four months.
The company expects to commission its 2mtpa coal gasification and gas based DRI unit at Angul in FY13. We are
positive about JSP's long term growth outlook but in the near to medium term, weaker merchant power rates,
possible delays in commissioning of steel projects and starting of captive coal mines will slow down earnings
growth. We are cutting sales volumes of steel and pellets by 2.5% and 10% respectively in FY12 to factor in lower
performance in 1QFY12. As a result, FY12E EPS is cut 5% to INR42.6 and FY13E EPS is unchanged at INR52.9.
Maintain Buy.
Standalone PAT down 27% QoQ; pellet production down 4% QoQ
JSP's 1QFY12 net sales declined 8% QoQ to INR25.3b due to lower steel sales
because of weak market conditions. Sales tonnage of steel products declined 14%
QoQ to 456,887 tons (against our estimate of 517,000), and steel production declined
only 2% QoQ to 607,726 tons. Thus, steel inventories increased 22% QoQ to 0.3mtpa.
Production of pig iron declined 6% QoQ to 402,107 tons. Sponge iron production
increased 13% QoQ to 363,653 tons. There were no sales of sponge/pig iron. However
JSPsold 180kt iron ore fines in 1QFY12.
JSP's pellet plant reached a production rate of 4mtpa but production in 1QFY12
disappointed and declined 4% QoQ to 828,800 tons due to logistic bottlenecks in the
Barbil region. Pellet sales increased 54% QoQ to 347,104 tons, lower than the expected
500kt, due to lower production.
EBITDA declined 10% QoQ (up 22% YoY) to INR9.6b (against our estimate of
INR12.3b) due to lower steel products and pellet tonnage.
Consolidated debt at the end of 1QFY12 was INR140b with cash and equivalents of
INR20b. Thus, net debt was INR120b.
JSP plans to invest INR100b in FY12 and FY13. At present CWIP is ~INR70b.
Captive power plant (10x 135MW): Two units at Tamnar not stabilized; Angul
unit stabilizes faster
Captive power generation declined 7% QoQ to 931m kWh as the Tamnar units
(2x135MW) are facing teething problems despite being commissioned 8-10 months
ago. Average PLF achieved was just 50-55%.
Captive power plants made losses as JSP capitalized three 135MW units in 1QFY12.
It had higher interest and depreciation costs and insignificant contribution from merchant
sales. Power generated at the units was used as captive consumption and the older
340MW CPP was on a maintenance shutdown.
One 135MW unit, at Angul has been running at 90-95% PLF over the past few days.
This is expected to contribute to 2QFY12 volumes.
Demand from Orissa is low. JSP is trying to get open access since Orissa is unable to
consume the power generated.
Cost of production at these 10 units is expected to be INR1.75-2.25/kWh depending
on transfer pricing of middling. At present, the Raigharh units are expected to run on
middlings generated in captive coal mining. Coal linkage is available for all six 135MW
units at Angul. Once captive coal mining starts at Angul, coal middlings generated in
the process will be used to generate power at the six power units. Captive coal mine
(Utkal B, allotted to the Angul steel plant) is expected to start in FY12 as most clearances
are in place.
Jindal Power merchant rate INR4.19/kWh, two units to shut for maintenance
in 2QFY12
PAT at Jindal Power, a subsidiary of JSP, declined 9% QoQ to INR4.5b due to lower
realizations and higher costs.
Jindal Power produced 2,166m kWh at PLF of 99% in 1QFY12. Jindal Power sold
1,910m kWh implying average power rate of INR3.92. Merchant rates were INR4.19/
kWh.
Nearly 15% of the power was sold to the state at INR3.13/kWh, implying merchant
rates of INR4.1/kWh.
Internal consumption was much higher at 12% against a normal run rate of 7%.
Two units of 250MW each undertake planned maintenance shutdown for 15 days in
2QFY12 as power demand is low during the quarter.
BTG ordering for Jindal Power's Goda and Dumka projects is expected in 3-4 months.
Jindal Power expects FY12 merchant power rates to be INR3.75-4.75/kWh. Power
rates are trading lower due to liquidity issues with SEBs and this situation is not expected
to last long.
Overseas operations in green; Iron ore shipments from Bolivia to start in
FY12
Overseas operations contributed INR110m to the bottom line. Profits from the Oman and
South Africa mines were partially offset by other corporate overseas experimental
investment activities.
Shadeed, Oman: Shadeed produced 300kt of DRI and contributed INR370m to
consolidated profits.
South Africa: 0.3mt of coal was exported in 1QFY12 from South Africa contributing
INR30m to the bottom line.
Bolivia: Jindal Steel Bolivia, a subsidiary of JSP, started dispatches of iron ore from
its El-Mutun mines in Puerto Aguirre, a river port in Bolivia. JSP is investing in building/
widening roads to transport the ore from its site (~30km away from the Parana River)
to Puerto Aguirre port (handling capacity 40mtpa). Iron ore shipments are expected to
start in FY12, but the management gave no guidance on export volumes. Corporate
tax rate is ~25% and royalty on iron ore varies on grade and ranges from 15-25%. JSP
plans to invest ~USD200m in Bolivia in FY12 and FY13.
Indonesia: Indonesian coal mines are expected to start production between February
and June 2012.
JSP expects delay in Angul project, cutting FY12 EPS 5%; Maintain Buy
A 2mtpa coal gasification and gas based DRI unit in Angul is expected to be
commissioned in FY13. JSP had planned to commission a 1.5mtpa plate mill and DRI
unit by March 2012.
We are positive about JSP's long term growth outlook as it is augmenting its steel
capacity 4x over four years and power generation capacity 10x in 10 years. Only a
third of its planned 12mtpa steel capacity will be exposed to coking coal imports. Even
overseas coal mines can cover the requirement in future, depending on the progress.
However in the near to medium term, weaker merchant power rates, possible delays
in commissioning of steel projects and starting of captive coal mines would slow earnings
growth. We are cutting sales volumes of steel and pellet by 2.5% and 10% respectively
for FY12 to factor in lower performance in 1QFY12. As a result, FY12 EPS is cut 5%
to INR42.6 and FY13 EPS is unchanged at INR52.9. Maintain Buy.
Company description
Jindal Steel and Power (JSP) has 3mtpa of operational
steelmaking capacity at Raigarh. JSP has one of the best
iron ore and coal resources in India, with assets over various
mineral-rich countries. JSP offers the best insulation from
iron ore and coking coal prices among Indian steel producers
and is the only power producer in India that has most of its
projects secured for coal from captive mines. JSP has rich
iron ore and coal resources overseas, mainly in Bolivia,
Mozambique, South Africa and Indonesia.
Key investment arguments
JSP plans to increase steel capacity 4x over four years.
It is augmenting its 3mtpa capacity, by setting up a
1.6mtpa module in Angul, which will use the coal
gasification route. It plans to add two more modules of
1.6mtpa each at Angul and Raigarh, using this
technology. At Patratu (Jharkhand), JSP has selected
the blast furnace route to make steel. It will produce
3mtpa of steel in phase-I.
Only a third of the 12mtpa steel capacity will be exposed
to coking coal imports. Even imports may be covered
by overseas coal mines, depending on progress.
Jindal Power, JSP's 96.43% subsidiary, plans to increase
capacity by 10x in 10 years by adding 4,380MW of
thermal power projects in Chhattisgarh and Jharkhand
at a capex of USD5.3b and 6,100MW of hydro power
projects in Arunachal Pradesh at a capex of USD8.1b.
Key investment risks
An unexpected fall in steel prices and delay in project
execution will adversely impact earnings.
Recent developments
Jindal Steel Bolivia (JSB), subsidiary of JSP,
commenced dispatch of iron ore from its El-Mutun mines
in Puerto Aguirre, a river port in Bolivia. Iron ore
shipments are expected to start in FY12.
Valuation and view
The stock trades at a P/E of 13.8x FY12E and EV/
EBITDA of 10.4x FY12E. Maintain Buy.
Sector view
The steel pricing environment weakened due to demand
uncertainty led by political crisis, the European debt crisis
and inflation in developing countries. Recently, prices
recently started consolidating as raw material prices
were firm. Apparent world steel use is expected to
increase 5.9% to 1,359mt in 2011 as per WSA. Indian
steel demand is expected to grow 12-14% over 2010-
12 due to the government's planned infrastructure
investment and strong domestic consumption. However,
raw material scarcity and incremental capacity addition
are expected to put pressure on margins. World crude
steel production increased 7.6% YoY to 758mt in
1HCY11.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Jindal Steel and Power's (JSP) 1QFY12 consolidated PAT declined 8% QoQ to INR9.2b (against our estimate of
INR11.4b) due to lower-than-expected sales of steel products and lower pellet production. Net sales declined 8%
QoQ to INR25.3b due to lower steel sales because of weak market conditions.
Pellet plant reached production of 4mtpa but production in 1QFY12 disappointed, declining 4% QoQ to 828,800 tons
due to logistic bottlenecks in the Barbil region.
Captive power generation declined 7% QoQ to 931m kWh as Tamnar units (2x135MW) still face teething problems
despite being commissioned 8-10 months ago. Average PLF achieved was 50-55%.
Overseas operations contributed INR110m to the bottom line. Profits from Oman and South Africa mines were
partially offset by other corporate overseas experimental investment activities.
JSP's PAT declined 9% QoQ to INR4.5b against our estimate of INR4.7b. Average rate was INR3.92/kWh, in line with
our estimate of INR3.9/kWh. Merchant power rates were INR4.19/kWh. We expect ordering for Goda and Dumka
projects within four months.
The company expects to commission its 2mtpa coal gasification and gas based DRI unit at Angul in FY13. We are
positive about JSP's long term growth outlook but in the near to medium term, weaker merchant power rates,
possible delays in commissioning of steel projects and starting of captive coal mines will slow down earnings
growth. We are cutting sales volumes of steel and pellets by 2.5% and 10% respectively in FY12 to factor in lower
performance in 1QFY12. As a result, FY12E EPS is cut 5% to INR42.6 and FY13E EPS is unchanged at INR52.9.
Maintain Buy.
Standalone PAT down 27% QoQ; pellet production down 4% QoQ
JSP's 1QFY12 net sales declined 8% QoQ to INR25.3b due to lower steel sales
because of weak market conditions. Sales tonnage of steel products declined 14%
QoQ to 456,887 tons (against our estimate of 517,000), and steel production declined
only 2% QoQ to 607,726 tons. Thus, steel inventories increased 22% QoQ to 0.3mtpa.
Production of pig iron declined 6% QoQ to 402,107 tons. Sponge iron production
increased 13% QoQ to 363,653 tons. There were no sales of sponge/pig iron. However
JSPsold 180kt iron ore fines in 1QFY12.
JSP's pellet plant reached a production rate of 4mtpa but production in 1QFY12
disappointed and declined 4% QoQ to 828,800 tons due to logistic bottlenecks in the
Barbil region. Pellet sales increased 54% QoQ to 347,104 tons, lower than the expected
500kt, due to lower production.
EBITDA declined 10% QoQ (up 22% YoY) to INR9.6b (against our estimate of
INR12.3b) due to lower steel products and pellet tonnage.
Consolidated debt at the end of 1QFY12 was INR140b with cash and equivalents of
INR20b. Thus, net debt was INR120b.
JSP plans to invest INR100b in FY12 and FY13. At present CWIP is ~INR70b.
Captive power plant (10x 135MW): Two units at Tamnar not stabilized; Angul
unit stabilizes faster
Captive power generation declined 7% QoQ to 931m kWh as the Tamnar units
(2x135MW) are facing teething problems despite being commissioned 8-10 months
ago. Average PLF achieved was just 50-55%.
Captive power plants made losses as JSP capitalized three 135MW units in 1QFY12.
It had higher interest and depreciation costs and insignificant contribution from merchant
sales. Power generated at the units was used as captive consumption and the older
340MW CPP was on a maintenance shutdown.
One 135MW unit, at Angul has been running at 90-95% PLF over the past few days.
This is expected to contribute to 2QFY12 volumes.
Demand from Orissa is low. JSP is trying to get open access since Orissa is unable to
consume the power generated.
Cost of production at these 10 units is expected to be INR1.75-2.25/kWh depending
on transfer pricing of middling. At present, the Raigharh units are expected to run on
middlings generated in captive coal mining. Coal linkage is available for all six 135MW
units at Angul. Once captive coal mining starts at Angul, coal middlings generated in
the process will be used to generate power at the six power units. Captive coal mine
(Utkal B, allotted to the Angul steel plant) is expected to start in FY12 as most clearances
are in place.
Jindal Power merchant rate INR4.19/kWh, two units to shut for maintenance
in 2QFY12
PAT at Jindal Power, a subsidiary of JSP, declined 9% QoQ to INR4.5b due to lower
realizations and higher costs.
Jindal Power produced 2,166m kWh at PLF of 99% in 1QFY12. Jindal Power sold
1,910m kWh implying average power rate of INR3.92. Merchant rates were INR4.19/
kWh.
Nearly 15% of the power was sold to the state at INR3.13/kWh, implying merchant
rates of INR4.1/kWh.
Internal consumption was much higher at 12% against a normal run rate of 7%.
Two units of 250MW each undertake planned maintenance shutdown for 15 days in
2QFY12 as power demand is low during the quarter.
BTG ordering for Jindal Power's Goda and Dumka projects is expected in 3-4 months.
Jindal Power expects FY12 merchant power rates to be INR3.75-4.75/kWh. Power
rates are trading lower due to liquidity issues with SEBs and this situation is not expected
to last long.
Overseas operations in green; Iron ore shipments from Bolivia to start in
FY12
Overseas operations contributed INR110m to the bottom line. Profits from the Oman and
South Africa mines were partially offset by other corporate overseas experimental
investment activities.
Shadeed, Oman: Shadeed produced 300kt of DRI and contributed INR370m to
consolidated profits.
South Africa: 0.3mt of coal was exported in 1QFY12 from South Africa contributing
INR30m to the bottom line.
Bolivia: Jindal Steel Bolivia, a subsidiary of JSP, started dispatches of iron ore from
its El-Mutun mines in Puerto Aguirre, a river port in Bolivia. JSP is investing in building/
widening roads to transport the ore from its site (~30km away from the Parana River)
to Puerto Aguirre port (handling capacity 40mtpa). Iron ore shipments are expected to
start in FY12, but the management gave no guidance on export volumes. Corporate
tax rate is ~25% and royalty on iron ore varies on grade and ranges from 15-25%. JSP
plans to invest ~USD200m in Bolivia in FY12 and FY13.
Indonesia: Indonesian coal mines are expected to start production between February
and June 2012.
JSP expects delay in Angul project, cutting FY12 EPS 5%; Maintain Buy
A 2mtpa coal gasification and gas based DRI unit in Angul is expected to be
commissioned in FY13. JSP had planned to commission a 1.5mtpa plate mill and DRI
unit by March 2012.
We are positive about JSP's long term growth outlook as it is augmenting its steel
capacity 4x over four years and power generation capacity 10x in 10 years. Only a
third of its planned 12mtpa steel capacity will be exposed to coking coal imports. Even
overseas coal mines can cover the requirement in future, depending on the progress.
However in the near to medium term, weaker merchant power rates, possible delays
in commissioning of steel projects and starting of captive coal mines would slow earnings
growth. We are cutting sales volumes of steel and pellet by 2.5% and 10% respectively
for FY12 to factor in lower performance in 1QFY12. As a result, FY12 EPS is cut 5%
to INR42.6 and FY13 EPS is unchanged at INR52.9. Maintain Buy.
Company description
Jindal Steel and Power (JSP) has 3mtpa of operational
steelmaking capacity at Raigarh. JSP has one of the best
iron ore and coal resources in India, with assets over various
mineral-rich countries. JSP offers the best insulation from
iron ore and coking coal prices among Indian steel producers
and is the only power producer in India that has most of its
projects secured for coal from captive mines. JSP has rich
iron ore and coal resources overseas, mainly in Bolivia,
Mozambique, South Africa and Indonesia.
Key investment arguments
JSP plans to increase steel capacity 4x over four years.
It is augmenting its 3mtpa capacity, by setting up a
1.6mtpa module in Angul, which will use the coal
gasification route. It plans to add two more modules of
1.6mtpa each at Angul and Raigarh, using this
technology. At Patratu (Jharkhand), JSP has selected
the blast furnace route to make steel. It will produce
3mtpa of steel in phase-I.
Only a third of the 12mtpa steel capacity will be exposed
to coking coal imports. Even imports may be covered
by overseas coal mines, depending on progress.
Jindal Power, JSP's 96.43% subsidiary, plans to increase
capacity by 10x in 10 years by adding 4,380MW of
thermal power projects in Chhattisgarh and Jharkhand
at a capex of USD5.3b and 6,100MW of hydro power
projects in Arunachal Pradesh at a capex of USD8.1b.
Key investment risks
An unexpected fall in steel prices and delay in project
execution will adversely impact earnings.
Recent developments
Jindal Steel Bolivia (JSB), subsidiary of JSP,
commenced dispatch of iron ore from its El-Mutun mines
in Puerto Aguirre, a river port in Bolivia. Iron ore
shipments are expected to start in FY12.
Valuation and view
The stock trades at a P/E of 13.8x FY12E and EV/
EBITDA of 10.4x FY12E. Maintain Buy.
Sector view
The steel pricing environment weakened due to demand
uncertainty led by political crisis, the European debt crisis
and inflation in developing countries. Recently, prices
recently started consolidating as raw material prices
were firm. Apparent world steel use is expected to
increase 5.9% to 1,359mt in 2011 as per WSA. Indian
steel demand is expected to grow 12-14% over 2010-
12 due to the government's planned infrastructure
investment and strong domestic consumption. However,
raw material scarcity and incremental capacity addition
are expected to put pressure on margins. World crude
steel production increased 7.6% YoY to 758mt in
1HCY11.
No comments:
Post a Comment