Reduce JSW Steel; target Rs 775: Angel Broking
Brokerage house Angel Broking has recommended a 'Reduce' rating on JSW Steel with a target price of Rs 775 in its October 30, 2013 research report.
October 30, 2013 / 15:47 IST
Angel Broking's research report on JSW Steel
"JSW Steel's standalone 2QFY2014 top-line and bottom-line were above our estimates due to better-than-expected sales volumes. However, given the recent run-up in the company's stock price. JSW Steel's standalone net sales stood at Rs 11,308cr, above our estimate of Rs 9,764cr due to better-than-expected sales volumes. On a pro-forma basis, its sales volumes grew by 22.0 percent yoy to 3.1mn tonne. JSW Steel's EBITDA stood at Rs 2,234cr, representing an EBITDA margin of 19.8 percent, which is above our estimate of 17.2 percent. The adjusted net profit (excluding forex loss of Rs 839cr) stood at Rs 941cr (above our estimate was of Rs 324cr). Its reported net profit stood at Rs 101cr."Outlook and valuation: "After declining steadily over the past one year, steel prices have risen by 3-5 percent post September 2013. Amidst low steel demand in India, domestic steel majors (including JSW Steel) have managed to report strong volume numbers during 2QFY2014 on the back of 1) import substitution arising out of higher cost of imported steel and 2) increase in steel exports – both of which are a result of sharp INR depreciation against the USD. However, looking ahead, we do not expect meaningful increases in steel prices during 2HFY2014 for JSW Steel. Also, we believe increasing steel production meaningfully from the current run-rate during FY2014 would remain a challenge for JSW Steel given the slow ramp up in production from iron ore miners in Karnataka. Valuing the stock at 5.0x FY2015 EV/EBITDA, we derive a target price of Rs 775 and recommend Reduce on the stock," says Angel Broking 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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