Sell JSW Steel, target of Rs 334: Karvy Stock Broking

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Karvy Stock Broking has maintained its sell rating on JSW Steel with a target of Rs 334 in its report dated July 17, 2009.

"JSW Steel is expected to report a robust volume growth of 53% YoY to 1.25 mn tonnes as it derives full benefit of commissioning of the three million tonne brownfield expansion project. We expect the revenue growth of 5.5% YoY (QoQ growth of 16.4%) to Rs 38,750 million. We expect steel prices to remain flat on QoQ. EBIDTA margins are expected to decrease by 396 bps YoY to 23.2%. The operating profit is expected to fall by 9.9% YoY to Rs 8,972. Though the company has given sales volume guidance of 6.1 million tonnes for FY2010E (78% higher than FY2009 volume), it must be noted that the company had given sales volume target of 5.5 million tonnes for FY2009 and it could achieve only 3.4 million tonnes. Hence, we are maintaining our target price at Rs 334 as of now. However, we would revisit the same if the company is able to achieve the sales volume growth as per guidance. Maintain Sell, " says Karvy Stock Broking's report.

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