Reduce JSW Steel; target Rs 572: Dolat Capital
Brokerage house Dolat Capital has recommended a reduce rating on JSW Steel with a target price of Rs 572 in its August 1, 2013 research report.
August 03, 2013 / 11:18 IST
Dolat Capital's research report on JSW Steel
"JSW Steel reported consolidated EBITDA of Rs 17.49bn better than our estimate of Rs 16.94bn as it gained from better cost efficiencies in fuel and iron ore despite flat realizations. However consolidated loss at Rs 3.81bn (DCe: Rs 2.88bn) was impacted by forex loss of Rs 8.61bn (Dce: Rs 7.31bn). JSW Steel has guided for a 9 percent increase in saleable steel volumes to 11.55mn tonne in the challenging steel demand environment and iron ore availability.We continue to maintain our Reduce rating on the stock with a price target of Rs 572 (5xFY15 EV/EBITDA)."JSW Steel volumes at 2.55mn tonne was flat YoY (on profroma basis) as it had an increase of 0.29mn tones inventory due to sluggish market demand and lower exports due to steep price decline. However we were surprise by strong JSW Steel EBITDA per tonne of Rs 7190 per tonne (Dce: Rs 6900 per tonne) led by cost savings in iron ore and fuel cost.""Chilean operation reported an EBITDA of USD0.6mn (DCe:3mn) whereas the US operations reported a marginal EBITDA of USD 0.6mn but continue to bleed at PAT level and reported a loss of USD13.7mn. JSW Steel coated products (Downstream units in Vasind, Tarapur and Kamleshwar) reported sales of 0.34 mn tons of steel, EBITDA of Rs 0.8 bn and EBITDA per tonne of Rs 2400 per tonne.""JSW Steel expects to incur a capex of Rs 105bn over a period of 2yrs and will spend Rs 50bn in FY14. It has spend Rs 10bn in Q1FY14. JSW Steel currently has net debt of Rs 295bn (which rose by Rs 10bn due to INR depreciation).and has a net debt equity of 1.38. We continue to remain concerned with high leverage on the balance sheet which will further detriorate due to unending capex cycle and weak operating cash flows," says Dolat Capital research report.Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions. 
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