MOSL: JSW STEEL (Buy)-Vijaynagar plant visit: The big getting bigger; Overall capacity to increase by 45%
JSW Steel: Vijaynagar plant visit: The big getting bigger; Overall capacity to increase by 45% at low specific capex of USD700/t
(JSTL IN, Mkt Cap USD10.1b, CMP INR302, TP INR366, 21% Upside, Buy)
We visited JSW Steel’s (JSTL) Vijaynagar steel plant on 11-12th December 2018. This plant is the largest single location steel producing facility in India, accounting for 12mtpa of JSTL’s overall capacity of 18mtpa. We note capacity at this plant will increase by 1mtpa to 13mtpa in FY20 as JSTL executes its 6.7mtpa overall expansion plan.
- The plant has the highest labor productivity, zero effluent discharge (95% of process waste is reused) and lower carbon footprint (96% of coke oven gases are recycled).
- Nearly 11mtpa of ‘C’ category iron ore mines have been allocated through auctions to various steel producers, which has improved ore availability to 39mtpa as against demand of 32-35mtpa.
- We visited corex furnaces, BF4 (blast furnace), HSM2 and interacted with management on day one, and CRM complex, pellet plant site and pipe conveyor on day two. Corex furnaces are operating at optimal capacity, with a total fuel rate of 1,050kg/thm (including coke rate of 180-200kg). BF4 is operating at a total fuel rate of 530kg (including coke rate of 360kg).
- The expansion program encompasses various upstream and downstream projects. Pipe conveyor is under trial run, which will save iron ore transportation cost by INR300/t, implying savings of INR5-6b on an annual basis. All captive mines are expected to be fully operational in FY19, which will save nearly INR10-12/t on an annual basis in transport cost. Although the pellet plant is in early stages of construction, all other projects are moving at a brisk pace. The expansion will increase cold rolling capacities as well, ensuring a similar product mix on higher volumes.
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.
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