Buy JSW Steel, target of Rs 1100: Angel

Angel Broking has maintained its buy rating on JSW Steel with a revised target price of Rs 1100 in its May 7, 2008 research report. "In 4QFY2008, JSW Steel posted a yoy 68% surge in standalone Topline to Rs 4190 crore (Rs 2499 crore). It may be noted the numbers are not comparable as the result includes SISCOL’s full-year numbers. Excluding SISCOL, Topline stood at Rs 2971 crore in line with our estimate of Rs 2968 crore. Even though Topline grew 68%, Bottomline grew by a mere 11.5% yoy impacted by Margin erosion of 1000 bp and higher interest and depreciation costs during the quarter. Net Profit grew 33.8% from Rs 1292 crore in FY2007 to Rs 1728 crore in FY2008. Consolidated net profit stood at Rs 1640 crore (Rs 1304 crore) in FY2008."

"At the CMP of Rs 877, on a consolidated basis, the stock is trading at EV/EBIDTA of 4.7x on FY2010E EBIDTA and P/E of 6.7x FY2010E consolidated fully diluted EPS, which we believe is attractive considering a robust earnings outlook, strong volume growth, stable steel prices, improved product mix and the company is moving towards becoming self-sufficient in its raw materials. We have downgraded our estimates by around 5% to factor in the steel price cut by Rs 4000 and Rs 2000 on flat and long products respectively. We maintain a Buy on the stock, with a revised target price of Rs 1100 (Rs 1170)," says Angel's research report.

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