MOSL: JSW STEEL (Buy)-Margin outlook remains positive-Iron ore mining and logistics benefits ahead
​JSW Steel: Margin outlook remains positive; Iron ore mining and logistics benefits ahead
(JSTL IN, Mkt Cap USD9.6b, CMP INR258, TP INR297, 15% Upside, Buy)
- JSW Steel's (JSTL) 2QFY18 consol. EBITDA grew 16% QoQ/3% YoY to INR30.4b (6% miss). Standalone EBITDA per ton grew 19% QoQ to INR7,467 (est. of INR7,655). Consol. PAT grew 34% QoQ/15% YoY to INR8.4b (est. of INR11.6b, miss due to a higher tax rate). Net debt (incl. acceptances) increased by INR10b to INR526b.
- Sales grew 12% QoQ to 3.92mt on destocking after the build-up due to GST in 1Q. Production was muted with just 1% QoQ increase to 3.94mt due to iron ore and water shortages. These issues are now behind.
- Coated business EBITDA declined 31% QoQ to INR1.4b, as realizations were under pressure due to higher imports, while zinc costs increased.
- Other subsidiaries (Salav, Industrial gases, etc.) reported EBITDA loss of INR320m, as against INR2.1b in 1Q, on certain intersegment eliminations.
- The Supreme Court is likely to soon announce the judgment on the lifting of iron ore mining cap by 10-15mt, as hearings are already over. This will ease supply in Karnataka and cost pressure. The pipe conveyor for transporting iron ore to Vijaynagar is also expected by May 2018, which will reduce logistics cost.
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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