Share Review - JSW Steel

JSW Steel reported its standalone 3Q FY 2012 results. The company’s net sales
grew by 35.5% y o y to Rs.7,860 Crore (in-line with our estimate of Rs.7,645 Crore).

Net sales growth was driven by in Croreeased steel volumes (+20.0% y o y to 1.9mn tonnes) and
realization (+18.2% y o y to Rs.43,401/tonne). Capacity utilization improved to 84%
at Vijaynagar plant in 3Q FY 2012, compared to 30-60% during 2Q FY 2012.

On the operating front, although JSW Steel’s EBITDA in Croreeased by 20.9% y o y to
Rs.1,253 Crore, EBITDA margin slipped by 191bp y o y to 15.9% on account of higher
raw-material prices. The company reported exceptional item related to forex loss
of Rs.500 Crore during the quarter.

The company also reported a tax reversal of Rs.141 Crore in 3Q FY 2012 compared to tax payable of Rs.147 Crore in 3QFY2011, which resulted in adjusted net profit growing by 74.8% y o y to Rs.668 Crore (higher than our estimate of Rs.482 Crore). Reported PAT declined by 56.0% y o y to Rs.168 Crore.

The company reported that its usable iron ore inventory at Vijaynagar plant
(capacity – 10mn tonnes p.a.) is expected to last for the next 3-4 months.
However, it opined that continuing steel production would remain a challenge
until the mining ban is lifted in Karnataka.

Angel Broking recommend Accumulate on the stock with a target price of Rs.699.

Share Review by Angel Broking
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