Jindal Steel Q3 PAT seen up 5.8% at Rs 1006 cr

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Jindal Steel and Power is expected to report a profit after tax of Rs 1,006 crore in the third quarter of FY12, a growth of 5.8% as compared to Rs 951 crore in the corresponding quarter of last fiscal; and 14.9% growth as compared to previous quarter.

Revenue is seen going up by 40% to Rs 4,431 crore from Rs 3,168.15 crore during the same period while it was flat on quarter-on-quarter.

EBITDA is likely to go up by 16% to Rs 1,840 crore in the quarter ended December FY12 versus Rs 1,592.9 crore in a year ago quarter; and seen up 9.1% growth quarter-on-quarter.

EBITDA is expected to be at 41.5% versus 50.3% year-on-year and 38.3% quarter-on-quarter.

Factors to watch:

Forex fluctuations:

Indian steel industry is likely to register losses related to payables on imported coking coal on account of 8.5% depreciation in the rupee from September 2011 but

JSPL is protected in the near term: short-term forex liabilities fully hedged but MTM loss on long-term ECB

Short-term forex liability such as buyer's credit for coking coal has been fully hedged

Notional loss is expected: ECB of Rs 20 billion is unhedged and likely to suffer from MTM forex loss

In Q2FY12, the company booked forex loss of Rs 1 billion.

But the repayment is only after 2-3 years hence any appreciation from the current level will negate this MTM noiotnal loss

Steel segment:

Strong growth in pellet and steel will drive revenue growth

Saleable steel volume is likely to be up 20% YoY and up 7% QoQ but steel realizations likely to remain flattish

Also its pellet plant expansion is ramping up and is expected to boast its sales volumes which is likely to see a 10% increase on a QoQ basis

Margins are likely to improve QoQ due to higher share of pellets

Power segment:

JSPL has recently commenced commercial operation of its 4th Unit of 135 MW power generation capacity in January 2012 at Chhattisgarh

However, for Q3FY11 contribution will be counted for only 3 units of 135 MW each ((2 Units in Chhattisgarh and 1 Unit in Odisha, Angul)

Orissa, Angul units: PLF is 90%, but under pressure as 75% coal is from e-auction

Two units of 135MW unit at Angul have been commissioned and are ramping up well (Only 1 has started commercial production)

Subsidiary Jindal Power's (JPL) standalone sales volume is likely to be marginally up but average rate is likely to be slightly lower at INR3.7/unit