Motilal Oswal is bullish on JSW Steel has recommended buy rating on the stock with a target price of Rs 241 in its research report dated May 17, 2017.
Motilal Oswal's research report on JSW Steel
JSTL will expand Dolvi plant’s capacity from 5mt to 10mt by Mar-20, taking the company’s total capacity to 23mt. The brownfield expansion at specific capex of USD0.5b/t (overall INR 150b) is less than half of recent/ongoing green field expansions in India (Exhibit 7).
With EBITDA of INR136-144b over FY18-19E and net debt/EBITDA of 4x (Exhibit 11), JSTL can comfortably fund capex; it is among the few players in India to benefit from the steel industry’s long-term growth potential. We increase capex to INR 80b for FY18E/19E, as guided. EBITDA is upgraded by 2%, PAT by 6% on lower tax. We value CWIP at 1x. Valuing on 12month rolling 7x EV/EBITDA, we derive a TP of INR 241. Maintain Buy.
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