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Jindal Steel & Power (JSP) - Qtr. Update - Dated - January 29, 2014




Axis Capital Limited


30 Jan 2014





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Jindal Steel and Power’s (Bloomberg: JSP IN) Q3 adj. PAT at Rs 4.8 bn was above our estimate of Rs 4.2 bn due to better than expected steel profitability, particularly due to strong volume at Oman (Shadeed)  Volumes at Oman operations improved 48% YoY to 500 kt. Revenue was USD 171 mn (up 45% YoY) with OPM at 14%  For Tamnar-II (4X600MW), the company plans to synchronize 3 units by the end of FY14 The stock is Under Review due to uncertainty on merchant power sales from captive mines and pending outcome of Shah Commission report on iron ore mines. Q3 highlights  Jindal Power (1 GW): Realization for the quarter was Rs 3.1/kWh (up 1% YoY, but down 1% QoQ). However, the cost of generation in Q3 has gone up significantly to Rs 1.4/kWh (+32% YoY)  Steel: volumes were 765 kt (up 4% YoY), while pellet production was 1mnt (up 9% YoY). The company expects to commission its Angul DRI plant in Q4 and ramp-up capacity in FY15, which should improve steel volumes in FY15. Our steel volumes are 2.8 mnt in FY14 and 3.4 mnt in FY15 Change in estimates: We upgrade our FY14/FY15 EPS estimates by 7%/15% to Rs 28.1 and Rs 27.3 respectively to factor in (a) higher captive power realization of Rs 3.5/kWh and Rs 3.32/kWh for FY14 and FY15 respectively (Rs3.08/kWh and Rs 3.07/kWh earlier), in line with the recent quarters and (b) higher steel volume assumption of 2.8 mnt and 3.4 mnt for FY14 and FY15 respectively (2.5 and 3.0 mnt earlier). At CMP of Rs 254, the stock trades at 9.0x FY14E EPS of Rs 28.1 and 9.3x FY15E EPS of Rs 27.3. Regards, Bhavin Vithlani (Executive Director – Power & Cap Goods) Institutional Equity Research Axis Capital Ltd Tel.: + 91 22 4325 1144 Jagdishwar Toppo (Executive Director – Materials) Institutional Equity Research Axis Capital Ltd Tel: +91 22 4325 1103 Nitesh Jain (Sr VP – Materials) Institutional Equity Research Axis Capital Ltd Tel: +91 22 4325 1145 Anup Kulkarni (AVP – Power) Institutional Equity Research Axis Capital Ltd Tel.: + 91 22 4325 1120

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