Jindal Steel & Power Ltd (Q3 FY13)

India Infoline News Service | Mumbai |

JSPL managed to register a strong growth of 24.1% yoy and 14.7% qoq in steel volumes to 0.73mn tons

CMP Rs389, Target Rs445, Upside 14.1%

Standalone revenue of Rs38.2bn was higher than our estimate on the back of strong steel volumes
JSPL managed to register a strong growth of 24.1% yoy and 14.7% qoq in steel volumes to 0.73mn tons
Standalone power production volumes improved marginally qoq
Operating profit of Rs12.8bn was marginally higher than our estimate due to jump in volumes
JPL’s power production declined sharply due to problems related to evacuation by the grid
Earnings to take centre stage; Maintain BUY with a revised 9-month price target of Rs445 

Result table (Standalone)
(Rs mn) Q3 FY13 Q3 FY12 % yoy Q2 FY13 % qoq
Net sales 38,209 32,983 15.8 35,890 6.5
Material costs (13,218) (12,022) 10.0 (10,809) 22.3
Power and fuel costs (2,368) (2,329) 1.7 (2,605) (9.1)
Personnel costs (1,079) (915) 17.9 (1,046) 3.1
Other overheads (8,764) (7,763) 12.9 (8,822) (0.7)
Operating profit 12,781 9,955 28.4 12,607 1.4
OPM (%) 33.4 30.2 327 bps 35.1 (168) bps
Depreciation (2,543) (2,103) 20.9 (2,489) 2.2
Interest (2,876) (1,553) 85.2 (1,779) 61.7
Other income 39 202 (80.6) 74 (47.1)
PBT 7,401 6,501 13.8 8,413 (12.0)
Tax (2,196) (1,890) 16.2 (2,591) (15.2)
Effective tax rate (%) 29.7 29.1
30.8
Adjusted PAT 5,205 4,611 12.9 5,822 (10.6)
Adj. PAT margin (%) 13.6 14.0 (36) bps 16.2 (260) bps
Reported PAT 5,205 4,611 12.9 5,822 (10.6)
Ann. EPS (Rs) 22.3 19.7 12.8 24.9 (10.6)
Source: Company, India Infoline Research

Strong volume growth led to a 15.8% increase in topline
JSPL’s standalone revenue increased 15.8% yoy and 6.5% qoq to Rs38.2bn, higher than our estimate. The jump in topline was largely due to strong steel sales volume. Steel sales volume of 0.73mn tons was higher than our estimate of 0.7mn tons and also higher by 24.1% yoy and 14.7% qoq. Except pig 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 too jumped sharply in the quarter by 34.2% yoy and 43% qoq to 0.62mn tons, which was quite higher than our estimate. Production of pellet was marginally lower on a qoq basis at 0.97mn tons. Blended realizations for the company declined by 2.2% qoq due to subdued domestic demand. Power production volumes improved from 1,457mn units in Q2 FY13 to 1,544mn units on account of increase in supplies of coal. External power sales increased 10.2% qoq to 603mn units, higher than the 6% qoq growth witnessed in power production. Average power realization in the standalone entity remained flat at Rs3.65/unit during the quarter.

Production and sales performance
(Tons) Q3 FY13  Q3 FY12 % yoy Q2 FY13 % qoq
Production




Sponge iron 337,686 312,164 8.2 316,192 6.8
Pig iron 457,708 458,794 (0.2) 451,034 1.5
Steel products 775,416 756,662 2.5 689,802 12.4
Pellets 965,950 938,280 2.9 1,031,705 (6.4)
Power (MW) 1,544 1,182 30.6 1,457 6.0
Sales




Sponge iron - 38,510 - 25,274 -
Steel products 733,641 590,940 24.1 639,349 14.7
Pellets 623,247 464,329 34.2 435,742 43.0
Power (MW) 603 350 72.3 547 10.2
Total steel volumes 733,641 629,450 16.6 664,623 10.4
Source: Company, India Infoline Research

OPM expands bps qoq led by lower power costs and a decline in other expenditure
Operating profit during the quarter increased 28.4% yoy to Rs12.8bn, marginally higher than our estimate of Rs11.7bn. The outperformance in operating profit was largely due to an increase in sales volume. However, OPM for the quarter shrunk by 168bps qoq due to a decrease in realizations and an increase in per ton raw material costs. Raw material costs as a % of sales increased from 30.1% in Q2 FY13 to 34.6% during the quarter. The increase in raw material costs per ton was due to purchase of sponge iron from external market. However, the impact of higher material costs on OPM was negated by a decline in power costs and a decline in other expenditure. Power and fuel costs as a % of sales decreased from 7.3% in Q2 FY13 to 6.2%. On a segmental basis, EBIT margins for the steel business shrunk from 26.4% in Q2 FY13 to 23.7% in Q3 FY13. On the other hand, power division EBIT margins increased from 33.2% to 39.7% on the back of lower coal costs. Costs per unit of power surprisingly decreased from Rs2.32 in Q2 FY13 to Rs2.2 in Q3 FY13.

Cost Analysis (Standalone)
(As a % of sales) Q3 FY13  Q3 FY12 bps yoy Q2 FY13 bps qoq
Material costs 34.6 36.4 (185) 30.1 448
Power and fuel costs 6.2 7.1 (86) 7.3 (106)
Personnel Costs 2.8 2.8 5 2.9 (9)
Other overheads 22.9 23.5 (60) 24.6 (164)
Total costs 66.6 69.8 (327) 64.9 168
Source: Company, India Infoline Research

JPL performance impacted by maintenance shutdown
JSPL’s 96.4% subsidiary, Jindal Power Ltd (JPL), recorded a bottomline of Rs2.56bn, a decline of 46.8% yoy. Bottomline is lower than expectations due to lower power production. Power production during the quarter declined 20.6% yoy and 4.7% qoq to 1.8mn units due to problems related to evacuation of power from the grid. Due to the grid failure in North-East India evacuation of power was quite lower during the quarter. Average power realizations improved marginally from Rs3.27/unit in Q2 FY13 to Rs3.39/unit in Q3 FY13. PLF for the quarter stood was low at 81%.

Segment results (Standalone)
(Rs mn)
BSE 165.00 3.50 (2.17%)
NSE 164.95 3.15 (1.95%)

***Note: This is a NSE Chart

 

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