Forwarding you the Result Flash on JSW Steel for 4QFY2011. JSW Steel‘s 4QFY2011net sales as well as profitability were above our expectations. However, its 1HFY2012 profitability is expected to be lower on the back of rise in coking prices. Nevertheless given its expansion plans and inexpensive valuations, we maintain Buy rating on the stock. Key highlights: · JSW Steel’s consolidated net sales increased by 32.5% yoy to Rs7,209cr in 4QFY2011, above our estimate of Rs6,375cr on account of higher-than-expected rise in realisations. The company’s saleable steel stood at 1.73mn tonnes (+14% yoy) during the quarter. · Realisations increased 19.4% qoq to Rs40,577, compared to SAIL who managed to raise prices by mere 8.4% qoq during 4QFY2011. · EBITDA increased by 25.8% yoy to Rs1,662cr; however, EBITDA margin declined by 127bp yoy to 23.1%. EBITDA per tonne for Standalone operations increased 14.7% qoq to Rs9,546, compared to SAIL, which reported EBITDA per tonne of Rs7,052. · The company expects sales volumes of 9mn tonnes (+47.5% yoy) in FY2012. · The company announced that it will expand its Vijaynagar steel capacity to 12mn tonnes by June 2013 with a capex of Rs2,695cr. 4QFY2011 Performance summary- Consolidated Y/E March (Rs cr) 4QFY11 4QFY10 yoy% FY11 FY10 yoy% Net sales 7,209 5,441 32.5 23,900 18,897 26.5 Raw material 4,339 3,155 37.5 14,705 11,231 30.9 % of net sales 60.2 58.0 61.5 59.4 Power & fuel 311 290 7.0 1,207 1,048 15.2 % of net sales 4.3 5.3 5.0 5.5 Staff cost 160 124 28.5 637 480 32.8 % of net sales 2.2 2.3 2.7 2.5 Other expenditure 812 587 38.3 2,689 2,128 26.3 % of net sales 11.3 10.8 11.3 11.3 Total expenditure 5,621 4,157 35.2 19,238 14,887 29.2 % of net sales 78.0 76.4 80.5 78.8 Operating profit 1,588 1,284 23.7 4,663 4,010 16.3 Other operating income 74 39 87.6 216 60 258.5 EBIDTA 1,662 1,323 25.6 4,879 4,071 19.8 EBITDA margin (%) 23.1 24.3 (126.8) 20.4 21.5 (112.9)
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