Jindal Steel & Power Ltd (Q2 FY13)
India Infoline News Service | Mumbai |
Jindal Steel & Power Ltd (Q2 FY13)
CMP Rs383, Target Rs470, Upside 22.7%
Source: Company, India Infoline Research
Strong volume growth led to a 7.7% increase in topline
Production and sales performance
Source: Company, India Infoline Research
- Standalone revenue of Rs35.9bn was inline with our estimate, as the impact of lower realisation was offset by stronger volumes
- JSPL managed to register a growth of 6.9% yoy and 13.9% qoq in steel volumes to 0.64mn tons
- Decline in standalone power production volumes was a negative surprise
- Operating profit of Rs12.6bn was marginally higher than our estimate due to a sharp decline in raw material costs
- JPL’s production and realization was quite lower than our estimate
- Earnings to take centre stage; Maintain BUY with a revised 9-month price target of Rs470
| (Rs mn) | Q2 FY13 | Q1 FY13 | % qoq | Q2 FY12 | % yoy |
| Net sales | 35,890 | 33,311 | 7.7 | 33,338 | 7.7 |
| Material costs | (10,809) | (9,702) | 11.4 | (11,008) | (1.8) |
| Power and fuel costs | (2,605) | (2,955) | (11.8) | (2,316) | 12.5 |
| Personnel costs | (1,046) | (1,117) | (6.4) | (933) | 12.1 |
| Other overheads | (8,822) | (9,160) | (3.7) | (8,214) | 7.4 |
| Operating profit | 12,607 | 10,377 | 21.5 | 10,867 | 16.0 |
| OPM (%) | 35.1 | 31.2 | 397 bps | 32.6 | 253 bps |
| Depreciation | (2,489) | (2,372) | 4.9 | (2,139) | 16.3 |
| Interest | (1,779) | (2,186) | (18.6) | (1,459) | 22.0 |
| Other income | 74 | 122 | (39.3) | 77 | (4.0) |
| PBT | 8,413 | 5,942 | 41.6 | 7,347 | 14.5 |
| Tax | (2,591) | (76) | 3,291.1 | (1,911) | 35.6 |
| Effective tax rate (%) | 30.8 | 1.3 | 26.0 | ||
| Adjusted PAT | 5,822 | 5,865 | (0.7) | 5,436 | 7.1 |
| Adj. PAT margin (%) | 16.2 | 17.6 | (139) bps | 16.3 | (8) bps |
| Extra ordinary items | - | (5,741) | - | (1,478) | - |
| Ann. EPS (Rs) | 24.9 | 25.1 | (0.7) | 23.3 | 7.1 |
Strong volume growth led to a 7.7% increase in topline
JSPL’s standalone revenue increased 7.7% qoq to Rs35.6bn, inline with our estimate. The impact of a sharp decline in blended realizations was offset by strong steel sales. Steel sales volume of 0.64mn tons coupled with sponge iron sales of 25,274 tons was higher than our estimate. Except sponge iron, production of all other products was higher on a yoy basis. The inventory buildup during the quarter was quite low compared to the previous quarter. Pellet sales which had plunged in the previous quarter by 42.7% qoq, increased 10% qoq to 435,742 tons. Production of pellet remained strong at 1mn tons, 14.9% higher on a qoq basis. Blended realizations for the company declined sharply by 7.8% qoq due to external sales of sponge iron. Power production power volumes decreased from 1,516mn units in Q1 FY13 to 1,457mn units on the back of lower PLFs from the new facilities. We are negatively surprised by the decline in power production. External power sales decreased 6.3% qoq to 547mn units, higher than the 3.9% qoq de-growth witnessed in power production. Average power realization in the standalone entity decreased from Rs3.95/unit in Q1 FY13 to Rs3.66/unit during the quarter.
Production and sales performance
| (Tons) | Q2 FY13 | Q1 FY13 | % qoq | Q2 FY12 | % yoy |
| Production | |||||
| Sponge iron | 316,192 | 374,683 | (15.6) | 339,809 | (7.0) |
| Pig iron | 451,034 | 484,492 | (6.9) | 413,097 | 9.2 |
| Steel products | 689,802 | 765,587 | (9.9) | 629,562 | 9.6 |
| Pellets | 1,031,705 | 1,006,080 | 2.5 | 898,065 | 14.9 |
| Power (MW) | 1,457 | 1,516 | (3.9) | 947 | 53.9 |
| Sales | |||||
| Sponge iron | 25,274 | 1,925 | - | 28,798 | (12.2) |
| Steel products | 639,349 | 561,337 | 13.9 | 598,209 | 6.9 |
| Pellets | 435,742 | 395,447 | 10.2 | 526,331 | (17.2) |
| Power (MW) | 547 | 584 | (6.3) | 222 | 146.4 |
| Total steel volumes | 664,623 | 563,262 | 18.0 | 627,007 | 6.0 |
OPM expands 397bps qoq led by lower power costs and a decline in other expenditure
Operating profit during the quarter increased 21.5% qoq to Rs12.6bn, marginally higher than our estimate of Rs12bn. The outperformance in topline was largely due to an increase in sales volume and a decline
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