JSW: Unsustainable costs (downgraded to SELL)
Cash costs for JSW in 2018 were 24% higher than our forecasts at the start of that year. With this as the new basis of our cost forecasts, we have cut our EBITDA estimates significantly (43-52% in 2020/21E), resulting in a 50% reduction in our price target (PT) and a downgrade of our recommendation from Hold to SELL. On the current cost base, JSW’s operations are FCF negative on our long-term price assumptions and, without management’s planned improvement in the coking coal mix from c.70% now to 85%, we would see even less value. With our expectation of falling coal prices, and the stock incorporating this operational improvement currently, in our view, we see more downside than upside risks at present.Jastrzebska Spolka Weglowa is a producer of type 35 coking coal (“orthocoking coal” according to Polish Standard). The main line of Co.'s business is also the mining and sales of steam coal. Co. is also central for selling all coal derivative products, i.e. coke and hydrocarbons produced by coking plants owned by the JSW S.A. Capital Group. The mining area is located in the Upper Silesian Coal Basin. The principal clients for Co.'s products are located primarily in Poland, Germany, Austria, the Czech Republic, Slovakia, and also India and Brazil.
WOOD & Company is the leading investment bank in Emerging Europe. Founded in 1991 and head-quartered in Prague, our footprint spans the region and touches investors around the globe.
A pioneer in Emerging Europe, WOOD executed many of the first CEE equity trades and landmark investment banking transactions. Our electronic trading platform was the first in the region, and remains the best. We are continually expanding our relevance and reach in these ever-evolving markets.
Our equity market share reflects our stature: 7% in Warsaw, 20% in Bucharest, 16% in Hungary, 40% in Prague and 5% in Vienna. Our distribution is unparalleled, with the largest salesforce in the region, servicing a uniquely diverse investor base.
We couple local expertise with a truly international perspective. With offices on the ground in the region, and in key financial hubs such as London and Milano, we are never far from our clients and we remain at the forefront of what’s afoot in the CEE emerging and frontier landscape.
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