JSW Steel a market performer: Karvy

Karvy Stock Broking has rated JSW Steel as a market performer with a target price of Rs 878 in its August 5, 2008 research report. "JSW Steel has reported substantial erosion in profitability during Q1FY09. EBIDTA margin has come off by almost 5 percentage points YoY to 27.1%. The company has reported a 53.9% YoY growth in topline to Rs 36,715 mn on the back of 13% higher sales volume and 36% higher realization YoY."

"The company has given robust sales volume guidance of 5.5 mn tonnes of saleable steel volume for FY2009, implying 62% growth. Around 0.9 million tonne of the volume growth will come from the brownfield expansion of 3 million tonne expected to be completed by September 2008 while the remaining will come from higher utilization of the existing capacity of 3.8 million tonnes. Even after factoring in volume growth for FY2009, we believe that the margin pressure would restrain the growth of the company. We maintain our target price of Rs 878 for the stock and rate the stock as Market performer," says Karvy's research report.

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