Moneycontrol
Last Updated : Nov 05, 2018 10:19 AM IST | Source: Moneycontrol.com

Buy JSW Steel with target Rs 406: Anand Rathi

We are positive about the long-term growth potential for steel consumption in the domestic market.

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JSW Steel is a part of the diversified USD 13 billion JSW Group, which has a presence in Steel, Energy, Infrastructure, Cement, Ventures and Sports. JSW Steel is one of the leading integrated steel company with an installed steel-making capacity of 18 MTPA in India.

JSW Steel's plant at Vijayanagar in Karnataka, is the largest single location steel producing facility in the country with a capacity of 12 MTPA.

The company manufactures and markets a highly diversified portfolio of flat and long steel products and is one of the leading producer and

exporter of coated flat steel products.

In the preceding two-and-a-half decades, the Company has grown significantly from a 1.6 MTPA capacity in 2002, it currently holds crude

steel production capacity of 18 MTPA; and is targeting to touch 40 MTPA in the next decade.

During the latest quarterly results the company has reported a growth of 25% in its consolidated revenues at Rs 2,15,520 million as against

Rs 1,72,400 million in Q2-FY18. The growth was mainly due to better realisation.

The company’s operating margins during the quarter stood at 22.8% at Rs 49,060 million in Q2-FY18 as against 17.6% at Rs 30,360 million.
The PAT margins for the company stood at 8.6% at Rs 18,440 million against 4.9% at Rs 8,410 million in Q2-FY18. The improvement in

margins was due to better realisation aided by higher capacity utilisations.

While in long term, the Company has announced cumulative capex projects of Rs 444.2 billion to expand the Company's steel-making capacity from 18 MTPA to 24.7 MTPA by FY-21 with downstream facilities and cost savings projects.

We are positive about the long-term growth potential for steel consumption in the domestic market. India will need to create over 150 Mn tons of new steel capacity in the next 10 years.

At CMP, the stock is trading 10x time FY19E and 10.3x FY20E earnings. We recommend buy with a target price of Rs 406 per share.
First Published on Nov 5, 2018 10:19 am
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