MOSL: JSW STEEL (Buy)-Strong volumes, lower CoP drive outperformance
JSW Steel: Strong volumes, lower CoP drive outperformance; Strong project pipeline provides comfort; Maintain Buy
(JSTL IN, Mkt Cap USD10b, CMP INR288, TP INR332, 15% Upside, Buy)
Consol. EBITDA of INR44.4b (-1% QoQ) in 4QFY19 was 10% ahead of our estimate, led by strong volumes and lower cost of production, partly offset by reduced realizations. This, along with other income (+43% QoQ), led to a 22% beat in consol. PAT (INR15.2b; -6% QoQ).
- Standalone volumes increased 17% QoQ to 4.29mt, led by exports (+1.6x QoQ). Realizations were down 8% QoQ due to lower steel prices and a higher exports mix.
- Spreads (realization - RM cost) at the standalone level were down by ~INR3,843/t QoQ owing to lower realizations, partly offset by reduced production costs. Standalone EBITDA was down 2% QoQ at INR43.4b (10% beat).
- EBITDA of subsidiaries was up 57% QoQ to INR990m (12% beat), led by a better US plate mill performance and lower losses for Aferpi, partly offset by higher losses at Acero.
- For FY19, consol. EBITDA was up 29% YoY to INR189.5b, while PAT rose 32% to INR76.4b. Net debt (incl. acceptances) stood at INR564b (+INR82b YoY).
JSW Steel Limited is a holding company. The Company is engaged in the business of production and distribution of iron and steel products. Its segments include Steel; Power (used mainly for captive consumption), and Others, which includes cement, mining and construction activities. Its product portfolio in flat and long steel products includes hot rolled (HR) coils, sheets and plates; cold rolled coils and sheets; galvanized products; galvalume products; non-grain oriented electrical steel (CRNGO); pre-painted galvanized products (color coated sheets/coils); pre-painted galvalume products; wire rods; special steel bars/wires; rounds and blooms, and angles. Its color coated products include JSW Pragati, JSW Colouron and JSW Colouron+. Its galvanized products include JSW Vishwas and GALVOS. It has plants in over six locations in India, including Vijayanagar in Karnataka, Salem in Tamil Nadu, and Tarapur, Vasind, Kalmeshwar and Dolvi in Maharashtra.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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