Jindal Steel & Power Ltd. (JSPL) | Q3FY15 Result Update | In line estimates, Lower revenue from Iron & Steel business was offset by strong revenue from power business; maintain HOLD rating on the stock with target price of Rs. 201 :: IndiaNivesh

Please Share::

�� India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details ��

��

-->

Jindal Steel & Power's (JSPL) consolidated Q3FY15 revenue decreased by 5% YoY and 4% QoQ to Rs. 50.44bn (v/s our estimates of Rs. 52.2 bn). Lower revenue from Iron & Steel business was offset by strong revenue from power business due to higher volume coupled with better realization. Sales volume of steel and pellets remained disappointing, as demand and prices deteriorated sharply during Q3FY15. Sharp increase in depreciation and financing costs, losses from WCL Australia coking coal mines and onetime expense of Rs 18.55 bn as additional levy (Rs 295 a tonne) to the government, caused net loss at consolidated level to Rs. 16.18 bn. However Adjusted PAT (excluding exceptional item additional levy forex loss and tax credit) stood at Rs. 2.29 bn in line our estimates of Rs. 2.28 bn. The company has paid additional levy of Rs. 30.89 as for coal extracted from year 1993 to 2014, shown 18.55 bn in profit and loss account and rest amount of Rs. 12.95 bn shown as a recoverable from government authority.

EBITDA margin contracted 483 bps YoY to 28.2% due to lower margin from Steel business. Margin of steel& Iron business contracted by 635 bps YoY due to lower realization and higher RM cost while power business margin expanded by 31bps YoY. JSPL's Oman unit has been performing consistently well and during Q3FY15 operated to near full capacity However, Company's WCL Australia coking coal mines continued to make losses due to operational reasons as well as low price levels. We believe recent De-allocation of captive coal block which provides energy for power and sponge iron plants will impact profitability, while the payment of levy would put extra pressure on already highly leveraged balance sheet. Total debt of the company has increased to Rs. 420 bn in Q3FY15 from Rs. 380 bn in Q2FY15. JSPL has submitted bid for blocks - Gare Palma IV/2 and IV/3 and & Gare Palma IV/1 and IV/7, we believe JSPL should be the key beneficiaries if these Coal blocks are allocated at rational prices, ensuring raw material security. We believe JSPl would get the benefit of its strategic location.


On steel front, Iron & steel business revenue decreased by 6% YoY (up 1% QoQ). Higher volume of sponge iron (up 42% YoY) was offset by lower pig iron and Pellets volume (down 29% YoY). The Raigarh Steel unit increased its sponge iron capacity to 3.6 MTPA compared to the previous 3 MTPA. Although JSPL successfully commissioned its billet caster plant in Angul, its plants capacity could not be fully utilized due to subdued demand for plates and Semi finished products. The company encountered major challenge in sourcing coal for coal gasification plant due to non-availability of its own local source The company’s external sales of pellets witnessed a major drop. Although JSPL successfully commissioned its new pelletisation plant in March 2014, the combined plant was operated at lower capacity utilization due to limited iron ore availability.

Power segment revenue jumped by 47% YoY and 2% QoQ to Rs. 1542 bn. Despite major problems in meeting its coal requirement for Tamnar Phase II units, its Q3FY15 sales and EBITDA grew by 36% and 10% YoY respectively. JPL's existing 4x250 MW projects continued to operate at PLF of 96%.  Further Three out of its four units of Phase II are already commissioned, while the fourth unit would be commissioned before the end of the current financial year. Two of the four 600 MW each units already have the coal linkage while the remaining two, as per Government's commitment will be given fuel linkage before March 31, 2015.  JSPL's Oman unit has been performing consistently well and during Q3FY15 operated to near full capacity. However, Company's WCL Australia coking coal mines continued to make losses due to operational reasons as well as low price levels. However, according to management major restructuring of its operations has been done which is expected to result in turnaround of business next year. Valuation De-allocation of captive coal block which provides energy for power and sponge iron plants will impact profitability, while the payment of levy would put extra pressure on already highly leveraged balance sheet. JSPL has submitted bid for blocks - Gare Palma IV/2 and IV/3 and & Gare Palma IV/1 and IV/7, we believe JSPL should be the key beneficiaries if these Coal blocks are allocated at rational prices, ensuring raw material security. We believe JSPl would get the benefit of its strategic location. At CMP of Rs. 154 stock is trading at 4.2xFY16E EV/EBITDA. We maintain HOLD rating on the stock with target price of Rs. 201.

LINK
http://www.indianivesh.in/Admin/Upload/635588150720735000_Jindal%20Steel%20_%20Power%20_Q3FY15%20Result%20Update.pdf